Is Options Trading Investing or Gambling for Newbies?

OPTIONS TRADING

Options trading has become one of the most preferred investment mechanisms in recent years. For newbies, it can be a daunting task. There’s too much information available in the market, which often needs to be clarified.

Before embarking on your trading journey, you should first understand what options are. We have written this guide for beginners who are eager to enter the world of options but need more knowledge and want to improve.

Trading options involves purchasing and selling an underlying asset at a pre-determined price by a specified future date. Options contracts are derivative contracts that give buyers the absolute right (but not the obligation) to buy or sell an underlying asset at a pre-determined price and by a specific future date.

What Are Options Contracts?

Steps To Follow While Trading Option

If you intend to embark on your options trading journey, follow all the steps mentioned on the next page.

If you want to trade options, you must have an options trading account. Compared to a simple brokerage account for stock trading, an options trading account usually requires greater capital involvement.

1. Open an Options Trading Account

After successfully opening the options trading account, you must decide on the type of options contract you want to enter. If you expect the market to increase, buy a call option or sell a put option. If the market goes down, sell a call option or buy a put option.

2. Select The Options Contract

An option contract is valuable only if the underlying stock price closes the option’s expiration period “in the money,” i.e., either above or below the strike price. (Above for call options and below for put options.) So, predicting the correct strike price is extremely important. Note: you cannot choose just any strike price.

3. Predict The Strike Price

Swipe up to continue reading!

Visit WealthyNickel.com  to learn how to save money and invest!

More posts:

12 High-Paying Trade Jobs – That Don’t Require a College Degree

eToro vs Ayondo: Which One Should You Choose To Trade With?