MT FINANCE: Optional Options
Why Should We Trade Options?
For small traders options are for lack of a better word, optional.
Options are risky — they destroy investors who don’t understand them. Option pricing is voodoo magic. Options are complex. Options are costly.
However, when used correctly, options have the potential to give leveraged returns and also provide insurance against market crashes.
It all comes down to the perfect asymmetry options come with.
Note: this article is part of a series on DIY money management. This article is NOT investment advice. Do not follow anything without understanding it. I am not a professional, and my knowledge is likely flawed. Proceed with caution.
What are Options?
Options are financial instruments which allow buyers to buy or sell an underlying commodity (e.g. stock, Forex, Index, etc.) at a fixed date in the future for a cost called “premium” paid to the options seller.
Buyers of an option contract don’t have the obligation to buy/sell the commodity — they can choose to do so if they want to. That’s what the option is for. Option sellers take the other side of the bargain.
