Trust trade option
Why trade options? Leverage For call holders, you can benefit from an increase in the market value of the underlying security over the lifetime of the option at a cost which trust trade option far less than the cost of buying the stock outright.
Limited risk If the price of the underlying security falls instead of rises, a call holder's maximum loss will be limited to the premium he or she paid for the option, plus any transaction or commission costs.
To fix a future price For call holders, options allow you to fix the future price at the strike price of the option of the underlying interest if you decide to take delivery of the underlying security.
Trust trade option, should the long call option expire out of the money, the premium paid would be lost, as it would not be economical to exercise the option.
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For put writers, locking-in a cost that is below market value can give you the opportunity to acquire the underlying interest at a fixed cost if the option is assigned otherwise the premium collected by writing the put options will be your profit.
The maximum risk for a short put is that the stock drops to 0 value, in which case you would take a loss equal to the strike price less the premium collected per the of shares exposure.
The risk of the long put is limited to the premium paid. Additional income Writers of puts and calls benefit from income received as a premium, which becomes pure profit if the option is never assigned.
Naked call and put writing are extremely risky strategies and should be used only by sophisticated investors with clear understanding of potentially unlimited losses and limited rewards. Strategies to help you invest better For Margin Requirements related to the Investment Strategies described below, please go to the Margin Requirements page The most popular bullish strategy Holder of a Long Call has the right to take delivery of the underlying security at the exercise price within a set period of time prior to expiration Used when the investor anticipates that the underlying security will increase in price Risk to this strategy is limited to the price paid for the contract Expand Long Put Just as Long Calls are the most popular bullish strategy, Long Puts are the most popular bearish option strategy.
For a long put holder to profit, trading on forts robots market price of the underlying interest must decline sufficiently to recoup the put premium and commission. A long put is used to profit from a decline in the market price of the underlying or to hedge a long position in an underlying interest.
The risk to this strategy is limited to the price paid for the contract. Potential profit is limited to the premium received when writing the call.
Julius Mansa is a finance, operations, and business analysis professional with over 14 years of experience improving financial and operations processes at start-up, small, and medium-sized companies. Before getting involved in forex tradingperform your due diligence. The NFA is the futures and options industry's self-regulatory organization.
If being assigned the Naked Call writer will have to buy the underlying at the higher market price and deliver it for the lower strike price. Risk is unlimited as the market price can potentially rise indefinitely above the strike.