What is Option Trading?
What is option trading? This is the hottest question on the trading boards all over the world!
Option trading is the simplest way to make a profit on any underlying asset. With an option, you can trade anything. Oil, gold, silver and other commodities, forex pairs, stocks, indices, they can all be used as underlying assets.
So, what is option trading? The best way to answer this question is with an example!
If you were to trade anything – any asset, whether it’s a commodity, currency, stock or an index, you would have to buy a certain quantity of the said asset. Although this sounds fairly simple, buying the physical asset can bring a lot of complications. This is especially true with commodities.
When you own a commodity, for instance a certain quantity of the crude oil, you have to worry about the transport and the storage, in addition to completenig the trading tasks. It gets even more serious if the commodity is a food – storing it properly is a must! All of this will bring additional expenses, and diminish the profit – not to mention the extra hours, effort and stress.
Option trading allows you to trade the underlying asset and make a profit without having to deal with any of this. An option is actually a type of a contract, which allows the trader to buy or sell the underlying asset, at the previously agreed conditions, at an exact point in the future. The contract doesn’t obligate the trader to have this asset in stock, or to deal with the storage, transport, and other tasks. Also, option trading doesn’t even require the trader to go through with buying, or selling the underlying asset, if it is not a profitable move. Simply put, an option is a contract that leaves the trader with an option to buy, sell, or do nothing.
With this in mind, here’s an even more comprehensive answer to the question “what is option trading”: It is a new way of trading, which allows a trader to quickly get in and out of any market, and make a very satisfying profit, without the complications and the requirements of the “old” trading systems.
The advantages of the option trading are obvious. First, the risks are limited – you can only lose the price of the option contract, since you are not obligated to act on it. The profits, too, are much higher, because there are no extra expenses to account for. Most importantly, by reducing the whole trading process to a simple “either-or” question, the traders get more control over their trades than ever before!
There are many different types of options, but the ultimate safety and the highest profit comes from the binary options. Trading binary options guarantees access to any market, and at the conditions that were previously reserved only for the crème-de-la-crème of the trading world. Nevertheless, the best thing about the binary options is the fact that anyone can use this innovative trading system to make a profit. With binary options, you do not need a huge account to start trading, or any special education, or even any previous experience in trading, whatsoever!
In all honesty, the most accurate answer to “what is option trading” is – it’s the trading system of the future. With the progress that various technologies have brought us, trades need to be safer, simpler and more flexible than ever before. Option trading makes all of this possible.