Options trading is described as risky by some quarters; hence it’s been easy to dismiss the benefits derived from it. Many people have just overlooked the fact that there are advantages and benefits in trading options. Just as all types of trade have inherent risks, but so also do some vital advantages co-exist.
It is rather true that options trading may not fit everyone. But it’s also true that those traders who have made good here have experienced the great flexibility offered for both the option buyer and the seller.
Most types of trading do not allow profiting from the underlying asset. With option trading however, this is very possible. Various strategies exist for traders to maximize this advantage.
When compared to stocks trading, options trading gives better protection to its participants. You’ll hear less stories of significant losses in options trading since traders lose only what they have invested. Usually investments are just minimal because traders are limited only to the price of the option. In addition, typical options are just at 10% of the value of the asset.
Options traders could also benefit from protective put. This is a type of options strategy that allows for purchasing the same number of puts and stocks such that the stocks are protected from depreciation of value. A trader who needs to buy an option in the future at a certain price can also do so. It is, in a way, insurance for the trader who currently has investments on long stock positions, especially during the times when the market is uncertain.