Home » Investing » Options Trading

Options Trading

Options trading allows investors to buy and sell contracts that give the holder the right to buy or sell an underlying asset at a specified price within a certain timeframe. Investors can use options to speculate on the direction of an asset’s price or to hedge against downside risk.

There are two types of options:

  • Call options, and
  • Put options

Call options give the holder the right to buy an underlying asset at a specified price, while put options give the holder the right to sell an underlying asset at a specified price. Options can be traded through most brokerage accounts on exchanges, or over-the-counter (OTC).

Options trading is a versatile strategy that can be used to speculate on the direction of an asset’s price, generate additional portfolio income, or hedge against downside risk. For example, investors who are bullish on an asset can use call options to buy the asset at a lower price than its future potential. Similarly, investors who are bearish on an asset can use put options to sell the asset at a higher price than it would trade for in the open market.

Options can also be used to hedge downside risk. For example, an investor who owns a stock may use options to hedge against the risk of the stock declining in value. By buying put options, the investor can protect their downside risk.

Risks

Many will say that trading options is risky. However, the risks are similar to trading stocks. Investors should consider trading options only on underlying securities they’d like to own while considering the probabilities of a profitable outcome.

robinhood vs webull - which is better

Webull vs Robinhood – Complete Review for 2023

Are you looking to trade stocks or options and wondering about the differences between Robinhood vs. Webull? Indeed, there are endless options for investing your hard-earned money. For example, some investors use an adviser, while others prefer doing it themselves with a low-cost brokerage such as Etrade or Schwab. However, startup brokerages such as Robinhood …

Webull vs Robinhood – Complete Review for 2023 Read More »

someone looking to invest in high dividend stocks

Selling Covered Calls For Monthly Income: Easily

Are you thinking of selling monthly covered calls for weekly or monthly income? If so, you came to the right place for this options trading strategy. Of course, if you landed here by accident, this article will blow your mind. As of , selling covered calls is still one of the most conservative income trading …

Selling Covered Calls For Monthly Income: Easily Read More »

an investor considering a leaps option trading strategy

Leaps Options Strategies: 2 Ways to Profit in A Bullish Market

Have you heard about LEAPS options trading strategies and wondered what they are and how they work? Or maybe you found this after reading an article, watching a video about leaps options, or trading in general and wanted something more – maybe something that made more sense to you.  Even in , buying and selling leaps …

Leaps Options Strategies: 2 Ways to Profit in A Bullish Market Read More »

a trader looking selling VIX put options to generate income

Make A Killing Trading Volatility with Options

For most asset classes, trading volatility is relatively straightforward. All it takes is to observe the asset’s price change over time and determine a suitable buy point and sell point. However, for options trading, volatility isn’t that simple. This is because options traders do not directly buy the security; instead, they purchase a derivative contract …

Make A Killing Trading Volatility with Options Read More »

best strategy for selling put options

What Is The Best Strategy For Selling Put Options?

Wondering what’s the best strategy for selling put options? Retirement is a subject that is on the minds of pretty much everyone; one day, we all hope to have enough assets saved up so that we will no longer have to work. Of course, accumulating assets for retirement is only half the story. Once we …

What Is The Best Strategy For Selling Put Options? Read More »

a trader looking selling VIX put options to generate income

Selling Weekly or Monthly Put Options for Income

Are you thinking of selling put options for weekly or monthly income? If so, you came to the right place. Selling put options is different than selling covered calls, however, both carry about the same risk, and are safe ways to generate income. But, what if you wanted to generate weekly or monthly income from equities …

Selling Weekly or Monthly Put Options for Income Read More »

covered call trade ideas

5 Covered Call Trade Ideas – Target 5% By Oct 8, 2021

Are you a dividend investor?  What if I told you there was a way to double, or even triple your income without incurring much risk.  In this article, I’ll introduce you to 5 covered call trade ideas on quality companies – dividend aristocrats that will do just that.  I’ve organized the trade ideas from the …

5 Covered Call Trade Ideas – Target 5% By Oct 8, 2021 Read More »

15585

Stay in Touch With Us

Get latest from The Financially Independent Millennial in our Friday Newsletter

15856