What is Options Trading?
What is Options Trading? Investment portfolios are often composed of diverse asset classes. These usually are stocks, mutual funds, ETFs, and bonds. Options are an additional asset class. If used appropriately, options trading offers numerous advantages that dealing in stocks and bonds alone do not. Before we address these benefits, what are options? What are Options? An ‘option’ is a contract that permits (but doesn’t necessitate) an investor to purchase or trade instruments like securities, ETFs or index funds at a pre-decided rate after a specified period. Selling and purchasing options are carried out in the options market. An option that permits you to acquire shares sometime in the future is referred to as a “call option.” On the other hand, an option that enables you to sell shares sometime in the future is a “put option.” Difference between Options Trading and Other Instruments Options are considered lower risk instruments than traditional futures contracts used in stock, index