If you plan to invest your money in options, keep in mind that it is a bit more complicated than buying shares. Options trading, however, provides you with a long list of advantages that are not available in the normal trading of stocks.
We will take a close look at the benefits of options trading in this article to see what it has to offer the average investor. We will also show you how and where to find the best advice and opportunities to invest your hard-earned money.
Keep on reading if you are interested in gaining more from your investment than just trading with stocks on the market.
What Are Options?
For the newcomer in the stocks trading industry, it might seem a bit overwhelming when experts start explaining the trading of options. Options are basically a contract that grants the holder the right to buy or sell a certain amount of assets at a given price.
These rights must be executed at a certain time, meaning you must buy or sell before the estimated time of the contract expires. As the bearer of the contract, you pay a strike price that is much lower than the value of the shares.
Also, every option contract is made up of 100 shares, which allows you to make a good capital gain when you sell. There are different types of options available that may have different effects on your share-trading and understanding them is important.
Call Options
A call option is when you call to buy the option at a strike price before the date of expiration of the contract. This is also known as the long option contract and the buyer makes a profit if the shares increase in value.
Basically, when you expect a rise in the value of a certain asset you will buy call options as part of your strategy.
Put Option
The put option is the opposite of a call option which means the holder of the options contract the right to sell in the allotted time. This is also known as the short option where you will sell before the time expires and the price it’s sold at is the strike price.
When you expect that a certain asset’s price will go down you will buy put options to ride the downward movement of the price.
If you are still not sure what an option is, take a look at this Youtube video for an easy explanation of the different types of options. We will now take a look at the benefits you have when investing your money in options instead of normal shares.
Benefits of Trading In Options
Let’s take a look at the benefits there are for the average investor to make it easier to understand them.
Low Capital Outlay
With options, you can make substantial profits without the need for a large sum of money to invest in buying stocks. This feature makes it possible for more investors out there who do not have large amounts of money available, especially for the careful beginner.
This is also a great way to expose yourself to the shares market where you buy at a very low price.
Cost-Efficient
It is more cost-efficient because you can buy the option at a much lower price than the value of the stock. This also means that you can make a profit even with very little money to put you on the road to more profit in the future.
In most cases, the gain of value when it comes to options will be anything from 100 and even up to 300 percent.
Much Better Rewards
When you opt for buying options instead of standard shares you can make a much better profit than with other methods. With options, your profits can be far greater because of the premium price you can pay for them at any point.
Flexibility
Options are far more flexible than most of the other forms of passive stocks and shares on the market you can invest in. They also provide you with the opportunity to make use of different types of strategies to invest your money in stocks.
Act As an Insurance
The options contracts you hold can act as a type of insurance for your investments so you do not take big losses. This can be done through a combination of the call and put options to ensure your investment against the possible decrease in the value of the assets.
Low Capital Loss
This advantage lies in the fact that you buy the options at premium prices which are much lower than the value of the asset. So if the asset value drops significantly you only lose the amount you paid for the option, which is lower than when buying standard shares.
Disadvantages Of Options
As with everything out there, options also come with a list of disadvantages so we will look at them as well.
A Steep Learning curve
Trading in options is a bit more difficult than buying and selling standard stocks and shares available for the average investor. Before you jump in and start buying options you need to understand how they work so you need to invest some research time.
Because of the complicated nature of these options, many average investors avoid them and lose out on great profitable opportunities.
Short-Term Investments
Options are considered short periods of investment because of the expiry date that is linked to them, with only a few months’ buying time. This simply means that there is not a lot of time available for price recovery when the value of your assets starts going down.
Most options will be available for a very short period of time which is mostly between three and four months before they expire.
Sharp Price Hikes and Dips
This is one of the main risks why not everyone invests in options and that is the sudden drop in prices that may occur. This can happen with even the slightest movement in the underlying stocks that may trigger a decrease in value.
Even though it is a risk, this feature can also be seen as an opportunity for the buyer to make a substantial profit.
You May Lose All Investment Capital
When buying options you pay a premium price but there is always the risk that you may lose the total amount of investment. In this case, it will not be similar to buying other shares where if they go down you sell at lower but get some capital back.
That is why you must not buy just one type of asset; the chances that everything goes down are slim.
Become an Insider Trader
Whether you are new to the stock-trading industry or a seasoned investor, everybody can do with some extra tips and advice. This is what you will get when you join the experts at Capitalists Exploits and through them the Insider newsletter.
When you join them you will have access to a myriad of expert information that will help you to invest wisely. You will have access to all the research these insiders possess from a long list of professional money managers from around the world.
Expert guidance on how to position your money with high-yielding investments and very low risks on your side is at your fingertips. All the available data is from those experts who make use of 3x and up to 100x returns on the capital you invest.
You will also have access to the same investment portfolios they have and where the experts from Insider invest their own money. You will also learn how to achieve asymmetric returns so you can have a more positive profit and loss profile.
Low-risk and high-upside investments are the norm for expert investors at Capitalists Exploits, which you will have access to. They will teach you how to avoid all high-risk companies so you will have peace of mind with your investment.
The advice they provide will help you prevent losing money on low reward assets, such as popular stocks on the market.
Who May Join
The great thing about this expert service is that anyone who has some capital to invest can join them for rewards. This includes people from all walks of life who have a working knowledge of the English language, so they can understand all the information.
No matter what your level of experience is or where you live, you are welcome to join and enjoy the benefits.
What Do You Get?
By joining with a low annual amount you will receive portfolio guidance from the experts and have access to fellow members. This is great for the beginners out there so they can learn from expert investors from around the globe.
Their blog posts are also at your disposal and you can keep your ear on the ground to find your next investment. Or you can make use of the free information provided at Hedgies Uncut to keep your information current all the time.
Summary
It is clear that options are high-risk but will also give very high rewards to make the risk worth the while for the investor. Hopefully, this will provide you with the motivation to seek help from professionals, and may you have high-paying investments.