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Trading with Options
Options are a type of financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (strike price) within a specified time frame.
Options are bought and sold on exchanges and are used by traders as a way to hedge risk, generate income, or speculate on price movements of various assets such as stocks, indices, commodities, and currencies.
There are two main types of options: calls and puts. A call option gives the holder the right to buy the underlying asset at the strike price, while a put option gives the holder the right to sell the underlying asset at the strike price.
Options trading can be a complex and risky endeavor, and it’s important for traders to have a solid understanding of the market and the factors that can affect the price of the underlying asset.
Some common option strategies include buying and holding, selling (writing) options, and spread trading, which involves simultaneously buying and selling options with different strike prices and/or expiration dates.
It’s also important for traders to understand the potential risks involved in options trading. These risks include the possibility of the option expiring worthless if the underlying asset price doesn’t reach the strike price, as well as the possibility of…
