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Option trading9/24/2023 ![]() ![]() Options trading differs from other financial instruments in several ways. Options trading is a type of financial trading that allows buyers to purchase the right, but not the obligation, to buy or sell an underlying asset at a predetermined price and date. Difference between options trading and other instruments The purchase and sale of an option contract do not mandatorily need to be executed if the position gets unfavorable, one can simply avoid executing. Whenever an options trader is buying or selling options, he/she receives a right, but not an obligation, to exercise an option before expiration. ![]() Put option: It is an option that provides the holder with a right and not an obligation to sell an asset at a particular price before the date of expiry.Call option: It is an option that gives the holder a right but not an obligation to buy an asset at a particular price before the date of expiry.There are two types of options that traders need to learn about: Therefore, it is a type of trading that provides the flexibility of not purchasing securities at a certain price for some time. Options trading provides an opportunity for traders to make gains from the change in the stock price without paying the purchase price in full, where only a premium amount has to be paid. Options trading involves strategies that provide traders with various market positions to make gains or mitigate the spot market risk. What is options trading?Īn option is a contract that gives the buyer the right but not the obligation to buy (call option) or sell (put option) a certain underlying asset at a particular price within a stipulated period. Here, we’ve discussed all an investor needs to know about trading options, option strategies and more. It is always advised that one should never place an options trade without adequate knowledge. However, observations suggest that most traders suffer losses in options trading due to a severe gap in knowledge & understanding of these derivatives. Options trading has become one of the most popular modes of investment in the last couple of years. ![]()
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