They say health is wealth, but money is essential for a healthy life. Yes, money is important. From the very beginning of our life, we were instructed to polish our skills, so that we can utilise them for earning in the future. People earn money through working in various service sectors and businesses. Investing in stocks and cryptocurrency provides a greater return than any other mode of earning, despite being high risk involved.
There are various means of investment in a stock market. These are trading, intraday, shorting, option and future. Among all, only options trading is considered the safest. It is because the loss involved is the least. In addition, the chance of earning profit is high. So, most of them prefer option trading.
In option trading, we try to determine the price of the stock in the near future. It is simple and tricky on the other hand. Let’s explore the possible benefits associated with option trading.
• Cost-effective:
Option trading is considered to be the most cost-effective method of trading. Not only the amount of money required is bare minimum but also the risk and the loss are less. Let’s assume you want to buy 20 units of 1000 rupee shares. So the total amount of investment will be 20000. On the other hand, if you prefer option trading, you can bid for two calls at 2000 rupees. So, you will be saving 18000 rupees.
• Least risk involved:
option trading has got recent popularity due to its low risk and high return potential. One may ask, wow is it less risky? In option trading, we bid for calls, rather than buying in full amount. In case your prediction is a mistake, you will only lose the token money, which was wasted on calls. On the other hand, the Shimla situation in intraday trading will incur a huge loss.
• Potential for higher return:
there is a chance for massive return in option trading. Option trading is generally conducted within a month. So the time and import are less in comparison to profit gained. Option trading is a mode of hedging rather than investing. In option trading the amount which is invested is very less, so you have ample chances for putting a call option. Since you can have more call options, you have a higher probability of gaining than losing. So, you are advised to utilise the money in the most effective manner, resulting in better returns.
• Other benefits:
there are other advantages of applying option trading. Option trading helps us to participate in other alternatives. Earning money is an important factor. In the case of stock market, a hard reader needs to be smart and disciplined to be successful traders. He needs to have a better understanding of a practice involved in a market, and he should be psychologically ready to face any challenge. Smart traders in stock market will prefer using more calls in different positions so that their probability of winning increases.
Conclusion
Option trading has multiple perks. Starting from being cost-effective and less risky,online trading has higher potential in return. A successful trader should keep the above points in mind while practicing option trading.
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