With many new investors flooding the market, being sucked in by “get rich quick” schemes, the phrase “options trading” comes up pretty often. As such, I’ve decided to share my ultimate guide to options in 2021, hoping to share my knowledge and help newer and experienced investors avoid making huge mistakes in the market. There have been many cases whereby investors make 10x or even 100x their money in a short period of time thanks to options. Of course, on the flip side, many investors got burnt, blowing their entire account from bad trades. Without further ado, let’s get right into my ultimate guide to options in 2021.
What Are Options?
Options are conditional derivative contracts that allow buyers of the contracts (option holders) to buy or sell a security at a chosen price. Option buyers are charged an amount called a “premium” by the sellers for such a right. Should market prices be unfavorable for option holders, they will let the option expire worthless, thus ensuring the losses are capped at the amount of premium paid. In contrast, option sellers also known as option writers, assume greater risk than the option buyers, which is why they demand this premium.
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