Why Invest in Stock Options?
Although stock options have a reputation for being risky investments that is complex and, therefore deemed too difficult to understand, one fact that is undeniable is that its popularity has definitely grown in leaps and bounds in recent years. While many may have had unpleasant encounters with stock options due to being inexperienced in the field, thus led to improper usage, options can be useful to the individual investors. Often seen as fast-moving, fast-money trades, stock options are sharp, versatile tools, which will enable you to adapt or adjust your position according to any situation that arises and also add value to your portfolio.
- Great Leveraging Power
Options investors have the ability to control the same amount of equity by coughing up a fraction of the capital needed. Desirable for short term speculative trading purposes, leverage can be achieved using call options, also known as stock replacement, that is feasible, practical and cost efficient.
A higher percentage of return is achieved if you spend much less money and make almost the same profit. Stock options requires you to commit less capital to an investment than a stock or other type of market trade requires.
- Limited Risk of Loss
As you have complete control over the exposure to risk, stock options allow you to create trading strategies with high probabilities of success, of course depending on how you use them. Due to their less financial commitment requirement and relative imperviousness to the potentially catastrophic effects of gap openings, stock options basically commands less risk. They are also safer than stocks as they are the most dependable form of hedge.
- Wide Array of Options Trading Opportunities
Available in a wide range of markets, such as agricultural products, metals, foreign currencies, interest rates, soft commodities, index products, energy products and many more, you are bound to discover a trading opportunity or two at almost any time.
- Liquidity Of The Market
As transactions can be executed quickly and easily, the market is the considered liquid and therefore your money is not tied up for a long time as it is in trading shares. Re-investments are possible which then lead to many more chances to make profits.