Many of you probably would have heard of Options, but have never used it because someone told you that these are complicated products which only market experts can understand. What they have probably not told you is that these are extremely powerful products which can be mastered by anyone through proper training and guidance. Want to begin your journey of learning options with Elearnmarkets? Join our course to get a Certification in Online Derivatives Demystified.
Why you should trade in Options?
Options offer two main benefits to every trader:
1. Unique risk reward ratio
The most compelling reason to spend time in learning Options is its risk reward ratio.
“Option buyers enjoy unlimited profits, and limited losses”
Whenever we mention this in our classes, everyone sits up in full attention, since this is the only exchange traded product which offers fabulously high rewards against limited risks.When the Option buyer’s view on the market proves to be correct, he is rewarded handsomely. Even when he is wrong, he can at the most lose the premium he has paid to the seller.
2. Participate with limited capital
Options require a relatively small outlay of cash for participating. You can purchase an Option at a fraction of the price of the underlying asset. Thus, even if you have limited capital, you can still participate in the Options markets.
Uses of Options:
The two basic types of Options, i.e. Calls and Puts are primarily used for the following purposes:
- Hedging: Buying Option is like buying insurance against your portfolio. It allows you to safeguard your portfolio of stock or futures from a possible erosion in value due to an adverse movement in the market.
- Speculation: have a view on where the market is headed next? You can use Options to profit from your view.
- If you are bullish, go long on Calls or sell Puts
- When you are bearish buy Puts or sell Calls
However, we strongly recommend that only the expert traders start selling Options, as it offers potentially unlimited losses and limited profits (up to the premium received)
Complex Option Strategies
Calls and Puts can be combined in infinite ways to give rise to various risk reward ratios. Once you understand the basic Option trading strategies and the risks associated with options trading, you can dive deeper into more complex exotic strategies to get a better return on investment.
The need for the right Options education
The key to becoming a successful trader lies in thoroughly understanding the trading product, and the risks associated with it. Thus, you need to get educated in Options from the experts to take full advantage of this powerful product. Dabbling in Options without understanding the product well can result in disasters.
We have just discussed the broad idea behind Option trading here. However, there are various other things like identifying the right strike prices, determining how much premium you should pay, Option Greeks, and also drawing the risks and payoff profiles of the various Option strategies that you need to learn in details.
Where to get educated in Options?
Elearnmarkets.com offers several high-quality training courses on Options. These are very student-friendly, and delivered in English and Hindi by eminent market experts. Whether you are a student, investor, or a trader in other products looking to upgrade your skills, you can find a course from Elearnmarkets.com and get educated in Options. We are sure that you will be proud of the decision that you make.