Advantages and Disadvantages of Options

Option disadvantages. Disadvantages of Option Trading | Terrys Tips

Advantages option disadvantages Disadvantages of Options Vinish Parikh October 19, Options are derivative instruments which are used by the traders and investors to hedge the risk against the market movement by paying premium.

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Hence an individual is making 10 times more money in case of options as compared to buying stock. Another advantage of options is that they provide investors with ample strategies so as to profit from volatility in stocks, so for example if an individual feels that during a particular month price of Google option disadvantages fluctuate but does not know the direction then he or she can use options to profit from such situation.

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Hence options are like critical medical operation if operation is successful then an individual will survive and if fails then it will lead to death of an individual. Another disadvantage of options is that they are option disadvantages liquid as not many people trade in options market and therefore in case of options liquidity is very less as compared to equity market.

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Due to low liquidity it is not easy to buy and sell which in turn leads to one selling at lower rate and buying at higher rate option disadvantages compared to option disadvantages markets which are very liquid. Complexity is another issue with options because most of options strategies are complex and it requires proper understanding of finance before executing such options strategies resulting in it being out of reach for common man as option disadvantages everybody has financial expertise to carry out complex options trade.

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As one can see from the above that option has benefits as well as limitations and any person thinking of doing option trading should carefully examine the pros and cons and then decide whether to do option trading or not as any mistake in option trading can result in huge losses for the person doing option trading.