The Difference Between Trading Stocks And Stock Optionsv

In the stock market industry, the trade for stocks and stock options are often interchanged and many may be confused between the concepts behind these types of trades. However, what you should know is that these two have very different characteristics from each other, and using them interchangeably can be very lethal if you want to engage in the stock trading game.

You can be guided on making a smart business decision on which particular trade you would actually want to make your investments,knowing the difference between these two would not only save you on making serious trading mistakes.

Stocks are shares of a company that is sold or bought by an investor. If you have a stock from a company, you have rights which may include a profit from the earnings. You also have the right to sell the stock if you do not want it anymore.

A stock option on the other hand, is not the stock or share of the company itself, but it is actually the rights for a certain stock. It actually allows you to buy and sell company stock at a set price in a certain time period. However, you do not gain the profits from the company itself.

Take note that in doing transactions for stock options, there will always be a buyer and a seller, and this may not always hold true when compared to stocks. When you sell stock options, you are actually creating a certain degree of security for the company as well as for yourself. In this way, the parties involved can make sure that money is actually made to the frequent trade that happens.

For a person or company with experience in the world of stocks, there are many different possibilities for trading and stock options. Experience in this field better prepares you for the risks involved and gives you strategies to cope with the changing market. However, someone newer to the field might not be recommended to take the same chances, given their lack of experience.

Therefore in trading options, there are fewer risks involved on the part of the buyer, especially when it comes to the possibility of losing a lot of money. And it may even give promises of profitable gains.What makes a lot of experts prefer options trading is usually because in this particular trade, no matter what would happen to the underlying security, an option buyer cannot lose to more than that of the initial price paid for the rights.

Unless the option is actually covered by a different option, then the seller may end up losing much more than the stock options original price.But on the other hand, the seller may experience greater risks. There may be a possibility that one has to deliver or take deliveries of the stock shares.

Then the best way for you to play the stocks trading game is to stick with the more traditional trading of stocks as this can be easier,and so, if you are not well skilled and knowledgeable about how you can prevent severe losses.

Just make sure that you take the time to understand concepts and strategies behind stock options before you actually start trading.However, if you do believe that you can manage then options trading may give you many promising positive results.


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Microtrading: Decent Returns?

I blogged about this idea not too long ago. The concept is to use very
small trades relative to your available margin and net asset value
(NAV). I'm doing this with the AUDJPY pair so that when I accumulate
positions I am earning a positive carry trade return.My trade size over
the last week has been such that the margin involved in each trade is
0.2% of my NAV. That's tiny. Twenty five