Part 12 Tradig Master Class

Uses of Options

Hedging: Investors use options to protect their portfolios against adverse price movements. For instance, a trader holding stocks can buy puts to guard against potential declines.

Speculation: Traders use options to profit from expected price movements with limited initial capital.

Income Generation: Writing (selling) options, especially covered calls, allows investors to earn premium income.

Advantages of Option Trading

Leverage: Options allow control over large positions with smaller capital.

Flexibility: They can be used in various strategies like spreads, straddles, and strangles.

Risk Management: Losses are limited to the premium paid for option buyers.