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Option Trading – As Risky As The Reputation?…

Options Trading has a reputation for being extremely risky, but this reputation is in large part undeserved. True, option trades are extremely risky – even dangerous if you have no idea what you are doing. However, that is true of all forms of offline or online trading, and trading in options is no exception.

While options trading has this reputation among laymen, it is often considered to be a form of risk limitation with professional traders. After all, in what other form of investment can you guarantee the maximum loss you can suffer right at the point where you enter the trade?

Options are contracts that give the purchaser the right to buy or sell an underlying security, such as a stock, a bond or a commodity, at a fixed price and for a fixed time period only. You can find options on underlying securities such as stocks, mutual funds, bonds, commodities, and more.

Option trading gives you the chance to exploit a whole range of market opportunities that are unavailable with conventional online stock or forex trading. For example, one class of option trade allows you as the buyer to make money if you expect the market to move strongly in one direction or the other, but you are not sure in which. If you are the seller of position, by contrast, you are betting that the market either goes nowhere directionally and/or the volatility declines.

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