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Options Contracts:
Basics for Trading
Ranked
among the riskiest of investments, even factoring in the alternative of hedging ,
options have a certain allure for investors.
Basically - the parties to the option
contract are the
holder, or the buyer, and the seller - the writer.
Why Options:
While it is clearly not our intention to convince anyone to seek the option,
typically what an investor wishes to achieve when entering the contract are such
reasons as, a guard agains price fluctuations while locking in desired pricing,
for a
form of equity
control, and, for speculators that have hopes of gains from short term trading
price
fluctuations.
Typically though, due to its extraordinary degrees of risk, and far from being
exclusive to the use of uncovered
calls, investors should only invest with options, as well as with futures - with
risk capital they are prepared to lose.
At the same time, however it should be recognized that options
carry the possibility of being traded at a fraction of the cost of the underlying
security.
Try to keep mindful of the fact that options are complex even for many a seasoned
investor/trader.
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