What is options trading

Options trading

What is options trading? Find out more. Trading with options provide a venue for traders to speculate on the market movement of asset prices. Opening positions are executed with very simple terms, a Call trade where investors can profit from an increase in prices; and opening a Put position, for declining asset values.

Advantages of options trading

Options trading is similar to trading over other financial instruments and it is always compared and contrasted with traditional trading. However, there are several notable advantages not previously available to traditional online brokers.

1) No commissions or broker fees. Compared with traditional online trading where broker fees and commissions are always a part of a trade, options trading will not cost you anything for fees and commission. Normally, traditional brokers will bill a very high premium just to buy one share of stocks. With options trading, the minimum investment amount that traders will spend is at least $10. And with trades finishing in-the-money, profits earned are immensely huge compared to your initial investment.

2) Variables. In regular trading, there are variables to be considered and each should be set accordingly if traders are expecting huge returns. To have a reasonable profit, assets should appreciate by a certain percentage. When you trade options, you only need to appreciate market values that are most likely to increase or decrease within a prescribed time period.

3) Investment amount. Traditional trading would require huge investment amounts to lock in trading profits. However, options traders can earn as much as 75%-92% of their small investment amount. Traders can magnify their gains, which makes trading with options friendly to small investors.

How to trade options

The process is relatively simple and can be broken down into four easy steps:

Select an asset. Each asset is different and has a dynamic nature. Choose one that you understand and restrict trading what you already know.

Analyze the direction of the asset. Using fundamental and technical analysis, speculate on which direction the asset prices are headed for. Other methods such as news research, earnings reports and dividends reports are helpful tools that you can use. If you anticipate that prices are likely to increase, then enter a Call trade. Enter a Put trade for declining prices.

Select appropriate timeframe. Your price forecast should be set within an appropriate timeframe for your predictions to be correct and earn profits. If you think that the asset prices of your chosen company will increase at the end of the day, then select one trading day as your expiry.

Specify the risk. Finally you are ready to specify the risk percentage of your investment size. There are high profits in options trading so identify the best combination of choosing the right options and set the position size accordingly.

Benefits of options trading

The main advantages of options trading. Learn more about all the benefits of options and apply them to your trading. Read more.

Advantages of options trading

What are the benefits of trading options?

Most of the people from all over the world are interested to become options traders because of the ease and profitability of trading, simplicity, risk- controlled and a profitable way to trade. Most of them are satisfied with the quick nature of options, that makes you to earn just in a few minutes up to 80% of your original investment. Payouts are always set in advance and it means that if you follow the market news, you can enjoy a high return in the wink of an eye.

Advantages of options

Benefits of options trading:

Simplicity

You can enjoy the simplicity of executing a trade, up or down. No special experience needed.

Lightness and flexibility

Options are available 24 hours even on weekends and holidays on a wide range of stocks, commodities, cryptocurrencies (Bitcoin), currencies and indices that you can trade on multiple timeframes.There is always an expiration time that gives new opportunities to traders.

Limited risk

You do not risk to lose more than you invested. You exactly know how much you lose or earn. That is why options have the lowest risk involved.

Predefined profits

There is a predefined payout percentage for your winning options trades. So, you know exactly the size of your profit before trading.

User friendly

Option platform is powerful and easy to use. You can enjoy the high speed and authenticity of your trades execution.

Mobility

You can easily trade options with mobile trading platform wherever you are. No need to worry about your transactions when you don't have a computer nearby, when you have a mobile phone.

Hedging opportunities

You can hedge other option positions that you have in the asset to prevent further losses.

Risk disclaimer: Trading in derivative financial instruments brings a high level of investment income, but is also associated with the possibility of losing your investment. Before bidding, it is recommended that you familiarize yourself with the terms of trade.

See also:
Best brokers for options trading
What are options
Types of options
Best options trading assets
Options trading platforms
60 seconds options
Student became a millionaire, earning on options
The investor earned $350 million in two weeks practically from scratch
How to learn how to make money online trading