1. Call Option: In a call option the right to purchase in a specific time and specific price is obtained.
2. Put Option: In a put option the right to sell in a specific price within a specific time is obtained.
You can trade with excellence in the options segment if you trade on the basis of Stock Option Tips from expert advisories like TradeNexa.
Before investing in stock market as a trader or investor you need to have an understanding of your goals and the market position. A call option is a deposit for future purpose and a put option is an insurance policy. Call option gives you a long position in the market and put option give you a short position in the market.
Some benefits of Options trading:
1. Leverage: Option trading is very attractive for small traders due to leverage provided. This means investment in minimum money.
2. Limits Risk: Second benefit of Options trading is that the risk is limited in investment you make. You can with limited risks invest your money in stocks option.
3. Higher Potential Returns: In option trading, as an investor you will experience higher percentage returns compared to stocks.
4. Work in Different Market Scenario: “Options” trading depends on different market conditions. There are various strategies available in market
5. Hedging: Hedging prevents you in incurring losses.
6. Income From Existing Portfolio: Long term investors want to lower the cost of their existing portfolio. All this advantages and benefits are rendered in options trading. But one should not ignore an important factor of option trading "time value". Time value is very important in stock options market.
Now we will have a look at different trading styles used in option trading as well as some instruments used in option trading:
1. Types of orders: When you buy or sell stocks options there are different types of orders that can be used. Two main orders are sell to open order and buy to close order.
2. Types of spreads: The biggest advantage of options trading is found in the creation of spreads. A trader needs to learn about different spreads and how they are used.
3. Types of trading styles: It's useful to understand the different styles of trading. You will want to decide which trading style is best for you.
4. Comparing option to other financial instruments: “Options” trading is more beneficial segment to trade as compared to the other segments available in the stock market.
Thus, if you want to trade profitably in the stock market, you can do so by trading on the basis of Stock Option Tips.