Investing has gained huge momentum in the recent years, because people have realized the value that it can bring for them and how it can help them earn profits in the long run. Many trading options have become a part of today’s market, but the most prominent and the tricky one has to be option trading for sure. For all those who are not aware with what options are, they are a kind of contract which gives the right to the buyer, and not the obligation to buy a specific asset at a particular price on or before a certain date. This trading has garnered popularity in the recent years; hence its importance can be understood from the same. The main reasons why individuals like option trading is due to the fact that they are able to get rid of unnecessary risk and eliminate it through hedging, as they majorly use it to have a great source of income and earn high amounts of profit, so that they can sustain in the market for a long period of time. Following are some of the benefits of option trading:
- Can help in hedging of risk: If you are buying a stock for a longer duration of time and that too at a lower put option, then your risk automatically gets minimized. In case, you are long at stock at Rs. 610, and you buy a Rs. 600 put option at a mere premium of Rs. 5, then the maximum loss that you will be incurring is Rs. 15 only, and it will not go beyond that in any case. This is the most important benefit of option trading, because no matter how much the price goes low, you will never suffer huge losses in any case.
- Reduction in holding cost: There may be instances where you won’t be seeing any change in the price of the options, then the best alternative that you can opt for is selling the higher call options and earning the premium out of them, which will eventually help in reducing your overall cost of holding that asset. This way you can trade in the safe options and save on your overall cost too, without creating any impact on the kind of options you have.
- Have a high-income potential: Options can help you in earning the same profits just like in the case of stocks, but only when they are bought at the right strike. Since we are buying the options at a lower rate, and getting the same amount of profitability, the percentage return is definitely going to be much higher, which clearly gives an indication of a high return on investment in all cases. Therefore, you can easily earn huge amount of profit without any issue
So, what are you waiting for? Start India trading and begin your option trading journey in the most righteous and exciting way, because the potential attached with it is huge in every case.