So, buy stocks online does that mean options trading is risky and should never be undertaken like what so lots of people in investment forums suggested?
First of, lets explore how about options that made it possible to firstly, buy stocks online lose your entire money and secondly, in a short time frame.
Options are derivative instruments which derives its value through the price of its underlying asset. It will not have value of its very own upon expiration. A call option supplying you with the right to purchase a buy stocks online at $10 only has value when the underlying buy stocks online is above $10. If the underlying buy stocks online is below $10, you might be already capable of buy the buy stocks online at lesser than the call option allows you to through the open market and the call option thus doesn't have value. When this situation occurs at expiration, an opportunity would "Expire Out Of The Money" without value left and you will probably lose all the money you used by buying those options. This is just about the most common way beginners lose all their money in options trading; By buying options with almost all their money just as if they are buy stocks online.
Secondly, options have definite expiration dates. Unlike buy stocks online, you cannot hold on to a losing options position forever. Options possess a definitely expiration date and if you buy options with not enough days left to expiration with no time left to move as predicted, you'd lose all of your money very quickly even if your underlying buy stocks online moved as predicted eventually. A lot of beginners buy options with too little months left to expiration because of the fact the more months left to expiration, the more expensive the choice becomes. As such, plenty of beginners result in the mistake of shopping for options that expire immediately and then lose each of their money rapidly.
As such, buy stocks online options trading may be risky and you can lose all your money quickly in options trading if you get options with your entire money with too few days left to expiration. As such, when you purchase options,buy stocks online make sure you purchase options just with money you can pay for to lose (maybe 2% or 5% of your total fund size) and make sure you purchase with enough time for it to expiration (maybe three months and more). When you follow those two simple rules, you will be able to avoid the situation in which you lose all your money in options trading very quickly.