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5 options trading strategies for beginners
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Getting your feet wet Without getting in up to your you-know-what Option trading is more complicated than trading stock.
Our opinions are our own. Options can provide flexibility for investors at every level and help them manage risk. To see if options trading has a place in your portfolio, read through the basics of what options are, why investors use them and how to start trading.
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What are options? An option is a contract to buy or sell a stock, usually shares of the stock per contract, at a pre-negotiated price and by a certain date. Just as you can buy a stock because you think the price will go up or short a stock when you think its price is going to drop, an option allows you to bet on which direction you think the price of a stock will go. Sell the contract to another investor.
Let the option contract expire and walk away without further financial obligation. But options are useful for long-term buy-and-hold investors, too. Learn the differences between options and stocks Why trade options?
Investors use options for different reasons, but the main advantages are: Buying an option requires a smaller initial outlay than buying the stock. An option buys an investor time to see how things play out.
Step 2: Connect to the Internet.
An option protects investors from downside risk by locking in the price without the obligation to buy. You also can limit your exposure to risk on stock positions you already have. If the share price does indeed tank, the option limits your losses, and the gains from selling help offset some of the financial hurt.
That education can come in many forms, including: Online options trading courses. One-on-one guidance online or by phone. Face-to-face meetings with a larger broker that has branches across the country. Even better, if a broker offers a simulated version of its options trading platform, test-drive the how to learn to trade options for beginners with a paper trading account before putting any real money on the line.
Consider what kind of contact you prefer. Live online chat? Phone support? Does the broker have a dedicated trading desk on call?
If you want to start trading options, the first step is to clear up some of that mystery. What are options, and why should I consider them? An option you purchase is a contract that gives you certain rights. Depending on the option, you get the right to buy or the right to sell a stock, exchange-traded fund ETFor other type of investment for a specific price during a specific period of time. Investors and traders use options for a few different reasons.
What hours is it staffed? What about representatives who can answer questions about thoughts from Edgar Options account?