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In options the potential for significant profits is exactly equal to the potential for significant risk. In other words, one trader’s gains on a contract match another trader’s losses down to ...
Certain high-risk options strategies can potentially expose investors to uncapped losses. Naked call options, for example, can put investors at risk when underlying stock prices increase ...
An effective options trading strategy requires that you understand these various indicators so that you know how options prices will move in response to time, the price movement of the underlying ...
The most bearish of options trading strategies is the simple put buying or selling strategy utilized by most options traders. The market can make steep downward moves. Moderately bearish options traders usually set a target price for the expected decline and utilize bear spreads to reduce cost.
As with all securities, trading options entails the risk of the option's value changing over time. However, unlike traditional securities, the return from holding an option varies non-linearly with the value of the underlying and other factors. Therefore, the risks associated with holding options are more complicated to understand and predict.
The naked option is one of riskiest options strategies, and therefore most brokers restrict them to only those traders that have the highest options level approval and have a margin account. Naked options are attractive because the seller receives the premium cost of the option without buying a corresponding position to hedge against potential ...
While options are normally associated with high risk, traders can turn to several basic option trading strategies that have limited risk. So even risk-averse traders can use options to enhance ...
A bear call spread is a limited profit, limited risk options trading strategy that can be used when the options trader is moderately bearish on the underlying security. It is entered by buying call options of a certain strike price and selling the same number of call options of lower strike price (in the money) on the same underlying security with the same expiration month.
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