Three Reasons to Trade Options – Trading Tips | Free Stock Tips …
Jul 23
Three Reasons to Trade Options
Posted in Stock Option Email This Post
Many investors are afraid of option trading due to the high risk. There is no shortage of horror stories of traders getting wiped out when irresponsibly option trading.
Options are like any other financial tool. Using them responsibly can greatly enhance your returns. Use options irresponsibly they can wipe you out easily.
The key is knowing your limits and only trading strategies and tactics that appropriate for the situation. You never want to bet the ranch on a single option trade. That is gambling not trading.
Here are three reasons that option trading makes sense.
1. Ultra low entry cost
Stock options provide the lowest entry cost of any legitimate financial instrument. A trader can open an account with as little as $500.00 to trade multiple option strategies. Stocks, futures and other instruments, regardless of their intrinsic cost, can be traded for a fraction of their actual cost .
2. Big profits
If your analysis is correct, doubling and even tripling your money on a single option purchase can easily happen. However, at the same time, there is equally high risk with strategies that can double or triple your money in a day or less. I have seen options go from a teeny which is an option is trading for $0.08 or less to $3.00 in a single afternoon of trading. This type of outrageous move isn’t typical but it can and does happen.
3. Multiple strategies can be used
Stock options are not just a one trick pony. Many strategies can be employed to gain profits with these instruments. Regardless of the market conditions or environment, there is an option strategy that can be used to earn profits
Share on Facebook
From:
Three Reasons to Trade Options – Trading Tips | Free Stock Tips …
See which stocks are being affected by Social Media
