Wednesday, 2 May 2012

CALL OPTION PUT OPTION


CALL OPTION PUT OPTION
Options (call put) is often considered a segment for advance traders, but if given some consideration, practice and guidance this is most profitable, flexible segment for traders., although not investors. For investors Option writing is better idea which we will discuss in later post.
Here we will give you some insight ,what are benefits of option trading and of course other side of picture too.

Advantages of Options Trading

Limited Risk Unlimited Profit
. Risk is limited to the option premium (except when writing options for a security that is not already owned).
Suits for every kind of market
 Options can be used in a wide variety of strategies, from conservative to high-risk, and can be tailored to more expectations than simply "the stock will go up" or "the stock will go down."
Leverage.
An investor can gain leverage in a stock without committing to a trade.Highly suitable for very short term traders.
Hedging.
 Options allow investors to protect their positions against price fluctuations when it is not desirable to alter the underlying positon.
Disadvantages of Options Trading
Time
Time kills profits in options at a very high rate and act as major disadvantage when u long option, while it is friend when u short option.

Costs.
 The costs of trading options (including both commissions and the bid/ask spread) is significantly higher on a percentage basis than trading the underlying stock, and these costs can drastically eat into any profits.
Liquidity.
 With the vast array of different strike prices available, some will suffer from very low liquidity making trading difficult.
.
Overall Options present a good opportunity to formulate plans which can take advantage of volatility in underlying markets as well as price direction. However for most traders the disadvantages are significant and online futures trading is usually a better option.



29 comments:

  1. This comment has been removed by the author.

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  2. rajni makhija7 May 2012 at 18:27

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  6. Hi, great info, thanks

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    Replies
    1. THANKS RAJAT FOR READING CALL OPTION PUT OPTION

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  7. gayatri sharma22 May 2012 at 17:12

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  17. An investor can gain leverage in a stock without committing to a trade.Highly suitable for very short term traders.

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