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About options trading Options trading is not a rare term in the trading industry but it is still in the beginning phases of getting prime attention. It is a rather advanced form of trading in which the investor gets the right to buy or sell an asset for a fixed duration and cost. Although it might sound tempting it is not easy for rookie traders and hence can result in loss. Trading options are provided on stocks and there is no need to be the owner of the underlying stock to do so. It can be divided into two major types • Call options • Put options Unlimited option strategies can be made by using both options properly. If used efficiently it can give benefits from both up and down moves, some experts can extract profit even when the stock is stagnant. Huge leverage in options trading Options trading can be used to make as much as 10 times the profit than normal buying of the underlying stock. Traders with low capital tend to choose options trading due to the leverage it provides. With low investments it has very low risk factor and hence small traders tend to try this often. The leverage associated with each option is also different depending on the different strike prices and expiration month chosen. A trader can choose to be as much aggressive as he wants to be but the risk factor rises exponentially. Drawbacks related to options trading It is much more complex than simple stock trade and hence if one is not aware of all the minute details he/she can incur a loss. An expert trader can gain good amount of income from options trading but the beginners must not get carried away and do proper research before investing. It must be kept in mind that most options are traded to close positions. Options trading can generate high profits, but at the same time can cause big losses. When trading using options you can lose the whole amount you invest in buying options, unlike when trading stocks where your stocks still hold some value even if they go down. This is why it is important for options trader to be aware that high profits come only where there are high risks. Some type of options (like binary options) look very simple and traders are tempted to treat them without much attention. The apparent easy win can sometimes work against you, and if you don't treat binary options like a regular investment you may find yourself on the losing side. If these essential things are kept in mind before investing then options trading can be a very fruitful option. Binary Options Trading, DWHM Trading
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