Trading options
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Options are popular among traders because they'll allow you trade with leverage. Why trade options?Īt this point you might be asking yourself, why not just buy stocks or commodities? Where a broker doesn't offer ASX stocks, we show US brokerage. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option. Standard brokerage is the cost to purchase $1,000 or less of ASX equities without any qualifications or special eligibility. Important: Share trading can be financially risky and the value of your investment can go down as well as up. In the meantime, the writer receives a payment for granting the taker this right. In this instance, again using shares options as an example, the writer of the option must buy the underlying shares, at a specified price, should the option holder decide to exercise their right to sell. They give the investor the right, without the obligation, to sell a specified trading instrument at a specified price on or before a specified date. Put options are the inverse of call options. The writer of the option receives payment for granting this right. In the example of shares, the writer of the option must deliver the underlying shares at a specified price should the holder of the option exercise the option. Options fall into 2 categories: Call optionsĬall options give the investor the right, but not the obligation, to buy a trading instrument at a specific price prior to a specified date. You'll profit based on the difference in price from the day you enter the contract to its future price. There's always an underlying asset attached to the contract, such as shares or commodities, which is how a price is determined. Options contracts are derivatives investments, which means you're exchanging contracts rather than buying and selling physical assets. What is an option?Īn option is an agreement between 2 parties to enter into a contract that gives the owner the right but not the obligation to buy or sell the underlying asset at an agreed-upon strike price before a specified date. The following guide will give you what you need to know before you option trade. It's less popular here in Australia than it is in the United States, but that's changing as more online brokers add options trading features. Options trading is seeing a surge in popularity with a volatile market creating opportunities for traders to cash in. Place your trade: Select the assets and place a "call" or "put" option trade.If you're using leverage, you'll need enough funds to cover potential losses. Fund your account: Transfer money from your bank account into the brokerage account.Research: Options trading is about trying to predict which direction an asset will move and so requires extensive research.Have a plan: Before you start trading, make sure you understand the risks and know how options trading works.You can compare popular brokers in the table below. Find a broker: You'll need to sign up to a stock broker that offers options trading.