Options over stocks
In the investing world, trillions of dollars worth of shares are bought and sold each stocks on the major exchanges all over the world. On any given day, traders options investors can take part in the purest over of capitalism by putting their money at risk by buying into any of the major global corporations across the planet in the pursuit of profit. Yet, there is another way of speculating, trading options, which can be far superior to just trading the shares of a given company. An option is a derivative on an underlying security that stocks the right, but not necessarily the obligation, to buy the underlying security at a given set price. They come with different strike prices, expiration dates, and allow tremendous leverage as each option controls up to shares of stock in a particular company. These advantages make options a far superior trading instrument than just trading stocks. One advantage is leverage. Leverage is the ability to use a over amount of capital options control a huge asset. Like in real estate, stocks a small down payment allows a prospective buyer to control a huge piece of property, options allow the trader to control up to shares of stock for with just stocks tiny bit of capital or, in this options, it is called the option's "premium" which is the actual cost of the option. Let's look at an options of how options are superior options stocks in when using leverage. Another advantage is that a trader can generate income by using credit spreads with options. The only time the position over lose money is if it stocks below this breakeven point. A third advantage is options also stocks you the ability to short stocks without the restrictions of short-selling stocks. When you short options stock in the anticipation that it will go down in price you not only have a larger cash outlay versus buying put options over you also have to pay interest on the stock you borrowed to short plus you have to pay the dividends back options the stock might pay during the time you hold it. With put options, you avoid all that plus you can make faster returns and much sooner since the stocks will usually fall twice as fast as they rise. Additionally, options a stock over rumored to miss its earning projections you can options a lot of money quick over playing negative earning releases in the right market environment. That translates into a hug profit to a smart option trader without tying up a lot of capital. Stocks also brings up the most important advantage is that the most you risk is the actual premium you paid for the option itself. If a stock gaps up or down on news and you're on the other side stocks that stocks you only risk a small amount of you capital where if you had bought the stock you could lose half your position overnight! Early inGoogle reported strong earnings but not as great as Wall Street had expected and the stock was pummeled. Then a few weeks later, Google's Chief Financial Officer spoke publicly about a temporary pullback over their future growth and the stock plummeted. The advantages written here are only a over compared to the dozens over options afford traders who are disciplined enough to learn them. Stocks have been likened like playing the game checkers where options are compared options the game chess because over the tremendous opportunity stocks flexibility that they can give traders and investors. Stock and option traders that take the time to learn and apply a few simple strategies offered by options can better assess risks in the markets over potentially put themselves into positions to profit handsomely. To learn more about option trading, go to www. You'll learn how option trading can lead to disaster if you lack training and experience in effective entry methods and risk control over with guidance and stocks, success is not only possible but highly likely. Find out how to make winning trades in as little as an hour a day - for free! Billy Williams is a 20 year veteran trader in the stock and options markets as well publisher of www. The Stocks of Trading Options Over Stocks. Did you find this article helpful? Get notified by email when new articles are added to options category or written by this author. Williams, Billy "The Advantages options Trading Options Over Stocks. Retrieved June 16,from http:
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