Options trading can sometimes feel a little intimidating, but in reality, it's fairly simple. This article will help you understand the basics of options trading and show you how to get started with options trading right away. What is an option? An option is essentially a contract that allows somebody to buy or sell an asset at a specified strike price within a specified time frame. What are the advantages of trading options? The most obvious advantage is leverage (it's 2-3 times more likely for you to make gains on your trade compared with buying/selling shares outright). Another advantage is that it allows you to hedge your existing portfolio. What are the risks of trading options? The risk with options trading is unlimited, just like shares trading there's a chance you could lose all your capital if the trade goes wrong. In addition, if you do purchase an option, you have to be prepared for the fact that if the market moves against you, your option may expire with a loss
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