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Options Trading Allows You To Control More Stock With Less Cash
Posted by GuestPoster in Personal Finances
If you are an avid stock trader but have never done any options trading, you many want to consider diversifying your portfolio by getting into the speculative market. A stock option is a contract between a buyer and seller that gives the buyer a chance to buy a particular stock at an agreed upon price. Options are purchased in contracts and one contract equates to 100 shares of a particular stock. So when you purchase an option you are controlling 100 shares of that stock without you having to actually purchase those 100 shares. So you can see that options allow you to handle much more stock than you would normally purchase.
Options are not without their risk however. Option contracts expire usually on the third Thursday of the month that they are listed for. So it is possible for an option contract to lose its full value whereas if you owned the stock, you still have your initial stock investment.
Tradeing stock options is not for everyone, but if you have put in your time buying and selling stocks and think you have the stomach for it, buying and selling options with a medium risk, can really increase your investment returns. If you don’t have an options account, you might take a look at the latest OptionsXpress Promotion where you can get $50 when opening a new Tradking account where options commissions are only $4.95 per trade.
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