Options are one of the most versatile trading tools available. A trader can use an option in order to limit risk on speculative investments. An option can also be used as a hedge against a declining stock market to limit downside losses.
Though trading options can be extremely profitable, a trader must understand that they involve risks and are therefore not suitable for everyone. Understanding how options work and how to utilize them can allow you as a trader understand the working of the market better and therefore have a much higher chance of being a successful trader.
Here is an infographic that looks at the basics of options.
[Click image for full size version]
Co-founder and Vice President of SearchRank, responsible for many of the day to day operations of the company. She is also founder of The Arizona Builders’ Zone, a construction / home improvement portal.
