Why Options Trading Are Better Than Stock Trading

3 June2Options are financial instruments that can make available individual investor with the correct, but not the compulsion, to purchase or sell a particular amount of an underlying asset at a predetermined price within a particular time period.

Following are some of the reasons why options trading is better than stock trading:

1) Options give you enormous influence and a a lot better manage of risk.

2) Using options can raise your returns which would, if not be smaller if you select to invest in the similar stock without options. To raise your return, you have to calculate whether the future market price of the fundamental securities will go up or down and the time frame in which this will happen.

3) Purchasers of options (both a call and a put Option) have a narrow downside risk. Their downside risk is strictly limited to the premium already used up plus commissions and other transaction fees.

4) Options are a lot cheaper than stocks. Investors will get that it is less expensive to purchase options rather than stocks themselves.

5) Forget about complex investment ratios. With stocks, there are a diversity of difficult ratios to analyze such as the price or income ratio, the price or income to growth ratio, the income per share, the price or book ratio and so on.

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