Advantages of Options Trading

Options are a great way to start investing for many reasons. They offer a great way to diversify your portfolio while limiting the amount you will need to invest in case your stock doesn’t move in the direction you are predicting. Options are a more affordable way to invest and, when planned well, can bring some excellent returns.

What are Options?


Options are contracts to purchase a stock or investment at a set strike price. There are two common types of options contracts, call options, and put options. Call options set a timeframe where you have the right to purchase up to 100 shares of a stock for a set strike price. Put options grant you the power to sell stocks at a set strike price.  These contracts offer some fantastic benefits that many investors tend to overlook. By taking the time to do your research on options, you can have a competitive advantage over the market and see some excellent returns in your investment portfolio.

Options Are More Affordable

One significant benefit of choosing to invest in options contracts is that they are typically far more affordable than buying the shares outright. The options contract gives you the right to purchase or sell depending upon the contract to 100 shares of stock. Because you haven’t taken ownership of any stock, option contracts tend to be significantly cheaper. If you are unsure where a stock may be heading, but have a feeling the company might increase in value, buying a call option is a great way to secure a set price, and know how much you stand to lose. This is a substantial benefit to options trading as you can invest with a bit more confidence compared to purchasing a stock outright and having your losses remain unknown.

Options Can Bring High Returns

Options contracts are a great way to play the market with some added leverage. As options contracts are more affordable, you can budget for more options, then if you were to purchase all of the shares outright. With a lot of practice and market research, this is a great way to maximize your returns when you land on a few stocks that see some increased value. All with a smaller initial investment.

Options open the door to a whole other level of strategy that can significantly benefit the investor when used correctly. While utilizing these contracts and spreading your investments around, you have more opportunities to see high returns. If things don’t work out, you can only lose your initial investment, nothing more. This makes trading options a great way to take advantage of a more aggressive strategy, yielding much higher returns on your investments.

If you are interested in learning all you can about options trading, Raging Bull is a site with professionals ready to help you learn everything you need to know. They have all the tools you need to become a successful financial trader. If you want to gain the competitive edge you need to trade options successfully, check out their article about the best stocks in options trading.