If you’d like to take advantage of a popular financial instrument that requires less capital than purchasing a stock, you may want to try stock options trading. It can help diversify your account and offers many different trading strategies.
Diversification
You may be familiar with the benefits of diversifying your portfolio. If you buy shares in just one company and it runs into financial problems, it could negatively affect the share price, decreasing the value of your portfolio. Purchasing a diverse group of stocks helps you avoid this risk. If you’d like to diversify more, you can utilize stock options trading. This strategy allows you to add options to your portfolio, which can provide a hedge or let you speculate with less capital.
Speculating
One of the advantages of stock options trading is the ability it gives you to speculate. If you feel like a specific company is going to have a great earnings report, you may want to purchase a few call options to speculate on the price action. Taking this step can cost you less money than buying shares and still provide an excellent profit.
Hedging
You can also hedge with options to reduce risk. If you think the economy is going to turn a certain way, which might affect your stocks, you can utilize an option strategy to combat this adversity. Using options in several different ways can offer you a wide array of choices and help you meet the long and short-term financial goals you created for your portfolio.
