Three Way to Use Options
This will introduce the three main options strategies: speculation income, or protection the advantages and disadvantages of each There are two kinds of options, calls and puts. The first strategy we'll look at is speculation . Usually when a trader buys a call or a put, he is speculating on the stock price. If you think a stock is going to rise, you'd buy a call . If you think the stock is going to fall, you'd buy a put . The advantage of speculating with options, is that it allows you the potential to profit from a securities price movement with a small initial investment for the option contract. However option is significantly riskier than a stock. For example, let's say you're bullish and want to buy a particular stock. Because the stock is trading around $670 per share, purchasing 100 shares would require you to invest about $67,000. However, you can purchase a call option for the same stock for significantly less. Fro example, one contract recently traded for...