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The options market offers some interesting advantages for UK investors when compared to some of the more traditional routes of practice. For example, an options trader has a much better idea (when compared to a spot trader) of the amount of risk that is currently present at any given time. This is because all of the costs associated with an options trade are essentially paid up front and then if there are gains that are generated by the position those will be paid out later.
There are some terms that should be understood if you are looking to begin options trading, factors like options expiry and strike price should be readily available for anyone that is looking to establish positions using a real money investment account.
Options Strike Price
When you are structuring your option position, you will need to understand where market prices are trading -- and where they are likely to be heading into the future. This can be a difficult task in some cases but this is why a successful position can be so profitable for investors in both the FTSE 100 and the British Pound.
A strike price is the market valuation level at which you believe your chosen asset may or may not travel in the future. If your initial ideas about the direction of market prices is correct, then there is a strong potential for investment profits from your reputable options broker.
Expiry Time
On the other hand, the options contract will also have an expiration time that will show when the contract has reached its point of completion. This can be short-term in nature (as in one day) or much longer term in nature (as in one month or three months).
The reality is that there is actually a lot of flexibility in terms of the time frames that can be used to enact an options trading stance and this is another one of the great advantages that investors can capture when taking a live stance in the market.
Overall, the expiry time and your strike price will encompass two of the most important elements of any options trade. Since you are paying for the full contract before the trade begins, you know the exact amount of your total risk right from the start. This is generally not the case for traditional spot trades, and so this is why the options trading strategy is one of the best possible choices for certain types of investment goals.
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