Are options better than stocks? In some ways they are. Options are contracts written on other assets usually stocks but also on ETFs, futures, currencies,commodities and others that give you the right but not the obligation to buy or sell the underlying asset at a predetermined price known as the strike price before a predetermined date known as the Excercise date. You buy that right by paying a small amount known as premium. Options can be of two types: 1) Puts and 2) Calls. Calls give you the right to buy the underlying asset whereas puts give you the right to sell the underlying asset at the strike price before the exercise date. Now options technically speaking are not investments as they have a limited time period before they expire. That time period may extend from a month to a year. LEAPs are Long Term Anticipation Securities and can have a time frame of up to three years. LEAPs are almost like regular options with the only basic difference their long time span. Options are tremendous instruments in the hands of speculators as they provide unlimited upside potential with a limited downside risk. You can even trade Index Options that are written on Stock Indexes like Dow Jones, S&P 500, NASDAQ, FTSE, DAX and others. In the same manner, you can invest in ETF Options that give you an opportunity to bet on an entire industry or sector instead of betting on a single security. Options on futures provide ultra aggressive investors with a high flying speculative instrument with high return potential. Before investing in options, you need to understand this fact that options can be risky as they have a time window before they expire. So suppose, you think that Google Stocks GOOG are going to rise in the next three months. You buy call options on GOOG. Now, if GOOG does not cooperate and does not rise as you had wanted it to, your options contracts will go worthless! So you always need to be cognizant of the time volatility of options contracts. What you need is a good course on how to trade options. Chris Rowe is considered to be a master options trader who astonished the trading community in 2005 by not losing even a single options trade in the whole year. You need to learn from him and take a look at his Options GPS Course!
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