- High leverage
- Limited risk
- Unlimited potential gains
Tuesday, December 12, 2006
Why Options?
Before we answer the why, we must answer the what. An option, is simply a right, but not an obligation, to purchase the underlying stock. One contract controls 100 shares. There are 2 kinds of options - Call and Put. Basically, to buy a call is to be positive about the stock; vice versa buying a put, is to be negative about the stock. As it is a derivative security, the price of the option is linked to the price of the stock. Options are becoming more and more widespread, as more and more people are realizing the advantages of trading options.
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