Options gives investors a more strategic way of buying, selling or shorting stocks. Traders can use options to protect against portfolio losses, snag a stock for less than it sells on the open market (or sell it for more), increase the return on an existing or new position, and lower the risk on speculative bets in all sorts of market conditions.

Yes, there are a lot of positives in the pros vs. cons of options trading. But there also are inherent risks. Here are some things every potential options trader should consider.

Advantages

The price of buying an option (the premium plus the trading commission) is a lot less than what an investor would have to pay to purchase shares outright.

The options investors pay less out-of-pocket money to play in the same sandbox, but if the trade goes their way they’ll benefit just as much (percentage-wise) as the investor who shelled out for the stock.

When you buy a put or call option, you aren’t obligated to follow through on the trade. If your assumptions about the time frame and direction of a stock’s trajectory are incorrect, your losses are limited to whatever you paid for the contract and trading fees. However, the downside can be much greater for options sellers

In an action similar to putting something on layaway, option contracts let investors freeze the stock price at a certain dollar amount (the strike price) for a specific period of time. Depending on the type of option used, it guarantees that investors will be able to buy or sell the stock at the strike price any time before the option contract expires.

Disadvantages

Unlike an option buyer (or holder), the option seller (writer) can incur losses much greater than the price of the contract. Remember, when an investor writes a put or call, he or she is obligated to buy or sell shares at a specified price within the contract’s time frame, even if the price is unfavorable (and there’s no cap on how high a stock price can rise).

The very nature of options is short term. Options investors are looking to capitalize on a near-term price movement, which must take place within days, weeks or months for the trade/contract to pay off. That requires making two correct assumptions: picking the right time to buy the option contract, and deciding exactly when to exercise, sell or walk away before the option expires. Long-term stock investors aren’t on a deadline. They have time — years, even decades — to let their investing theses play out.

Before you can even start trading options, you must apply for approval through your broker. After answering a series of questions about your financial means, investing experience and understanding of the inherent risks of options trading, the broker will assign you a trading level that dictates what types of options trades you’re allowed to place. Any investor who trades options must keep a minimum of $2,000 in their brokerage account, which is an industry requirement and an opportunity cost worth considering.

Some options trading strategies (such as selling call options on securities you don’t already own) require investors to set up a margin account — which basically is a line of credit that serves as collateral in case the trade moves against the investor. Each brokerage firm has different minimum requirements for opening a margin account and will base the amount and interest rate on how much cash and securities are in the account. Margin loan interest rates typically can range from the low single digits to the low double digits.

If an investor is unable to make good on the loan (or if the brokerage account balance dips below a certain percentage, as can happen due to daily market fluctuations), the lender can issue a margin call and liquidate an investor’s account if he or she does not add more cash or stocks to it.

34 Comments
  1. storno brzinol 5 months ago

    Very interesting info !Perfect just what I was looking for!

  2. Jamesurido 3 months ago

    Your welcome to join with this program, You can double your BITCOIN in just 24 hours without any problems. Minimum is only 0.001BTC, Our Company Is Legit.

    Visit link

    https://earn2xcoin.com

    Thank you

  3. web hosting our 3 months ago

    Excellent post. I was checking constantly this weblog and I
    am inspired! Extremely helpful information particularly the last phase 🙂 I maintain such information a lot.
    I was looking for this particular information for a long time.

    Thanks and best of luck.

  4. http://t.co 3 months ago

    Hi to every one, the contents existing at this site
    are truly awesome for people experience, well, keep up the good work fellows.

  5. http://t.co 3 months ago

    Great beat ! I wish to apprentice while you amend your
    web site, how can i subscribe for a blog website? The account helped
    me a acceptable deal. I had been tiny bit acquainted of this
    your broadcast offered bright clear idea

  6. in asmr 3 months ago

    hi!,I love your writing very much! proportion we be in contact more
    about your post on AOL? I require an expert in this area
    to solve my problem. Maybe that is you! Looking
    forward to look you.

  7. off scoliosis surgery 3 months ago

    whoah this blog is wonderful i love studying your articles.
    Keep up the good work! You know, many people are looking
    around for this information, you could help them greatly.

  8. asmr for 3 months ago

    What’s up, its good piece of writing about media print, we all understand media is a great source of facts.

  9. was asmr 3 months ago

    Please let me know if you’re looking for a article author for your weblog.
    You have some really great posts and I feel I would be a good asset.
    If you ever want to take some of the load off, I’d really like to
    write some material for your blog in exchange for a link back to mine.
    Please shoot me an e-mail if interested. Thank you!

  10. Edwardmup 3 months ago

    How To Double ETH Instantly In 2021

    ETHER Double is a fully automated ETHEREUM investment platform operating with no human intervention.
    Take full advantage of our fast and legit ETHEREUM doubler platform.
    Our automated system gathers information from the blockchain transfers and cryptocurrency exchanges to study and predict the ETHEREUM price.
    Our servers open and close thousands of transactions per minute, analyzing the price difference and transaction fees, and use that information to double your ETHEREUMS.
    Our data centers are located on multiple locations around the world so that our system has 100% uptime guaranteed.

    Visit site

    https://etherdouble.com

    Thanks

  11. asmr that 3 months ago

    Thanks for the good writeup. It in truth used to be a entertainment account it.

    Look advanced to far added agreeable from you! However, how
    could we be in contact?

  12. Hello, I think your site might be having browser compatibility
    issues. When I look at your blog site in Ie, it looks fine but when opening in Internet Explorer,
    it has some overlapping. I just wanted to give you a quick heads up!
    Other then that, superb blog!

  13. in quest bars 3 months ago

    I will right away grab your rss as I can’t to find your e-mail subscription link or e-newsletter service.
    Do you have any? Kindly allow me recognise so that I may just subscribe.
    Thanks. quest bars http://j.mp/3C2tkMR quest bars

  14. bit.ly 3 months ago

    What you published was very reasonable. However, what about this?
    suppose you wrote a catchier title? I ain’t suggesting your information isn’t good, but
    suppose you added a headline to possibly grab people’s attention? I mean Advantages and
    disadvanteges of stock options | Finwaze is kinda vanilla.
    You should peek at Yahoo’s front page and see how they create news headlines
    to grab people interested. You might try adding a video or a pic or two to grab readers interested about what you’ve written. In my
    opinion, it would make your blog a little bit more interesting.

    scoliosis surgery https://0401mm.tumblr.com/ scoliosis surgery

  15. app.gumroad.com 3 months ago

    Howdy fantastic blog! Does running a blog like this take a lot
    of work? I have no expertise in programming however I had been hoping
    to start my own blog in the near future. Anyways, if you have any
    recommendations or techniques for new blog owners please share.
    I understand this is off topic however I just had to
    ask. Thanks a lot! asmr https://app.gumroad.com/asmr2021/p/best-asmr-online asmr

  16. tinyurl.com 3 months ago

    Hi, I think your site might be having browser compatibility issues.
    When I look at your website in Opera, it looks fine but when opening in Internet Explorer, it
    has some overlapping. I just wanted to give you
    a quick heads up! Other then that, amazing blog!
    cheap flights http://1704milesapart.tumblr.com/ cheap flights

  17. Ahaa, its nice dialogue on the topic of this article here at this web site, I have
    read all that, so at this time me also commenting at
    this place. scoliosis surgery https://coub.com/stories/962966-scoliosis-surgery scoliosis surgery

  18. http://j.mp/3nkdKIi 3 months ago

    Hello there! This is my first comment here so I just wanted to give a quick shout
    out and say I genuinely enjoy reading through your articles.
    Can you recommend any other blogs/websites/forums that cover
    the same topics? Thank you! ps4 https://bitly.com/3z5HwTp ps4

  19. www.iherb.com 3 months ago

    I every time spent my half an hour to read this web site’s content everyday
    along with a cup of coffee. quest bars https://www.iherb.com/search?kw=quest%20bars quest bars

  20. http://bitly.com 1 month ago

    I was curious if you ever considered changing the structure of your blog?
    Its very well written; I love what youve got to say. But maybe
    you could a little more in the way of content so people could connect with it better.
    Youve got an awful lot of text for only having one or 2 images.
    Maybe you could space it out better? part time jobs hired in 30 minutes
    https://parttimejobshiredin30minutes.wildapricot.org/

  21. Lynnette Beckett 1 month ago

    Very soon this site will be famous among all blogging and site-building viewers, due to it’s good content|

  22. Cedrick Brattain 1 month ago

    Hi! I just want to give you a big thumbs up for your excellent information you have got here on this post. I am coming back to your website for more soon.|

  23. ps4 games an 1 month ago

    Pretty! This has been an incredibly wonderful post.
    Thanks for providing these details.

  24. our ps4 games 1 month ago

    Hello! This is my first visit to your blog! We are a group of volunteers and starting a new project in a community in the same niche.
    Your blog provided us valuable information to work on. You
    have done a wonderful job!

  25. Lon Blome 1 month ago

    Asking questions are truly nice thing if you are not understanding something totally, but this post gives fastidious understanding even.|

  26. Alvaro Tepp 1 month ago

    Wonderful site. Lots of useful information here. I’m sending it to a few buddies ans also sharing in delicious. And certainly, thank you in your sweat!|

  27. Will Paddio 1 month ago

    all the time i used to read smaller articles which also clear their motive, and that is also happening with this post which I am reading here.|

  28. Kristofer Uutela 1 month ago

    Its not my first time to go to see this web site, i am browsing this website dailly and take nice data from here every day.|

  29. Madison Pyros 1 month ago

    Good answer back in return of this query with genuine arguments and telling all regarding that.|

  30. Aracely Pfliger 1 month ago

    This piece of writing will assist the internet users for creating new website or even a blog from start to end.|

  31. Russel Renner 3 weeks ago

    I’m not sure where you’re getting your info, but good topic. I needs to spend some time learning much more or understanding more. Thanks for great information I was looking for this info for my mission.|

  32. asmr where 2 weeks ago

    I’m really impressed with your writing skills and also with the layout on your blog.

    Is this a paid theme or did you customize it yourself?

    Anyway keep up the nice quality writing, it’s rare to see a great blog like this one these days.

Leave a reply

Your email address will not be published. Required fields are marked *

*

CONTACT US

We're not around right now. But you can send us an email and we'll get back to you, asap.

Sending

FINWAZE makes no representations or warranties, express or implied, in relation to this website (www.finwaze.com) or the information and materials provided on this website. It does not also warrants that this website will be constantly available or available at all times. The information on this website is complete, true, accurate or non-misleading. Nothing on this website constitutes, or is meant to constitute, advice of any kind. FINWAZE shall not be liable for any damage or injury, whether direct or indirect, that it may cause in relation to the contents of, or use of, or otherwise in connection with this website. By using this website, you agree to the reasonableness of the limitations of liabilities herein set out and further agree to assume whatever risk, loss, damage or injury in may cause in connection to the use of this website. No claims shall be brought personally against the officers and employees of FINWAZE, in connection with the use of this website. The user of this website agree to the limitations of warranties and liabilities herein set out to protect the officers, employees, agents, subsidiaries, successors, assigns and sub-contractors as well as FINWAZE. Any unenforceable provisions that may be found on this website under applicable law shall not affect the enforceability of the other provisions.

Legal Documents  |  ©2021 Finwaze Philippines

Pin It on Pinterest

Share This

Log in with your credentials

Forgot your details?