Options Trade different from Stock Trading?

Options are contracts that follows the price of the underlying stock but takes far lesser money to buy than the underlying stock. That is why you noticed some people make a lot of profit from doing options trade. Thats because being able to control more stocks with lesser money gives you leverage and the ability to make more money from the same move in the stock.

In short, Call options allows you to profit when the stock goes up and put options allows you to profit when the stock goes down. Both kinds of options can also be "shorted" for the reverse effect. This makes options trading extremely versatile with almost countless strategies for hedging and speculation.

The problem with options trading is that options EXPIRE. This means that after some time, if the stock did not move enough to give value to the options, the options simply evaporate and you lose the amount of money you put into it. Thats why so many people say options are risky.

Well, thats just a very very very simplistic overview of options. Options trading is way too big a subject for me to outline here and there are even seminars that teach the basics of options for over $5000! I learnt all my options trading for free at the site below, hope it helps.




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