Why I Never Trade Stock Options
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Is trading options better than stocks? A lot of people believe it to be so because trading make money trading stocks and options poses make money trading stocks and options more risks than what trading options has. Options are what you would call as derivative instruments that are based on stocks and others like commodities, funds, futures, and index.
Derivative instruments are what you call trading instruments whose values depend on another security. Simply this means that the price of an option moves up and down as guided by fluctuations in the price of underlying securities. Stock options derive their value from underlying stock, letting investors buy or sell stocks at certain prices. Stock options then are not the stocks themselves. Rather, they are the contracts that give you power to buy or sell underlying stock. Stocks are what give you ownership in a company.
How much control you have over a company will depend on how much of its stocks you own. The only thing similar between options and stocks is that you can both buy and sell them.
Otherwise, the two behave very differently from each other. Is Trading Options better than Stocks. Options and stocks defined Options are what you would call as derivative instruments that are based on stocks and others like commodities, funds, futures, and index.
Advantages of trading options Consider the following reasons why trading options is better than trading stocks: Trading options gives you make money trading stocks and options that allows you to do more while using the same amount of money. This in turn make money trading stocks and options up opportunities for you to make a whole lot more profit compared to trading stocks when the same underlying stock moves. Please remember that as the profit possibility is leveraged also the risk of losing is leveraged in options trading.
Because of the leverage you get with trading options, you can do the same kinds of trades using less money, giving you the chance to simply use money you intend to and know you can lose should a trade fail. Allows betting downwards without margin. Typically, profiting from a downwards move on stocks involves shorting stocks with margins.
In trading options, you simply have to buy put options without margins. If you want to make the most out of an upwards move, just buy call options. Profits from all sides. When you trade stocks, you only make profits when stocks go make money trading stocks and options way you want them to: Trading options makes all of these possible though, with various strategies allowing you to make money no matter what way the stocks go.
Since you can make money whatever you decide to do, you must realize that there is also a chance to lose out when you engage in trading options.