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"Many people like options because they believe them to be less risky than futures. Options sometimes offer reduced risk, but usually at the cost of reduced profit potential.
One drawback of options is that a trader must consider market speed (volatility) as well as direction. Traders who buy or sell options outright to profit from up or down moves in the underlying market can find themselves fighting an uphill battle against volatility and time decay. With futures, if you’re right about market direction, you’ll win. With options, you can be right about the market and still lose...."
Revisit the Trader's Toolbox Post: "Learning Options Part 2 of 4" here.
8 thoughts on “Traders Toolbox: Learning Options Part 2 of 4 Revisited...”
Your article is very informative about traders toolbox. I am bookmarking it for my future reference.
I am in agreement with our friend, Archie; that w/ futures, one can lose big. Which illustrates one of the attractions of options: there are NO margin calls. Too, in certain option situations, one can obtain triple digit rates of return.
You also forgot to mention, if you're wrong on direction with futures you can lose big, but with options you can pre determine your max loss.
I agree with you a far a short term options but disagree if one compares long term options or "leaps," since there is much more time to reach a profitable position.
I'm just learning about options and find the time/volatility factor to be challenging. Any help for the investor who is just beginning in the options area? Any good examples? I'm a successful stock trader... just wondering how to incorporate options to assist me with my strategies.
PEPR IPO .37c
Any feed back ??
PEPR IPO .37c
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