Options Trading Secret Give Away Rights Ebook

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Chapter 5: Risks Of Option Trading

Synopsis

Being a comparatively popular financial instrument in current times the option trading choice is not done based on the lesser possibility of losses. It is however a safer form of investing by comparison.
The following are some of the risks an investor would have to be aware of in order to be able to make informed decision:

The Risks

The most common and basic element that often causes the negativity in the options trading scenario is the presence of greed. As there are no tools in place to combat the very non technical possibility the investor should be weary of bring this into the equation of option trading. The higher profits potential, often blinds the investor to the high risk possibilities which snap decision, gambles and abandoning of logical trading plans constitutes.

In the event of unwise choices made the loss of capital is not only a probability but also a definite result. This is because options trading usually result in a 100% loss when there is market movement in a downward trend.

Trading on the margin is also another risk to be aware of an preferably not indulged in. here the selling of options would involve the process or providing a margin hedging against the possibility of the trade turning into a losing position, and when this happens the debt incurred can be significant.

Not being technically sound enough to be able to manipulate the tools available is also another way to risk all the option trading investment made. There are tools that can be used to assist the investor in providing information and alerts to minimize the losses or capitalize on the gains, thus failing to stay informed with these assisting tools could prove to be costly.

Not being able to monitor the investment in real time is also another risk that needs to be weightened in for its disadvantage.

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