To trade an upward market trend (uptrend), you can either go long (through buying) in the underlying market or buy a Call option.
If the market rises, both the buy trade in the underlying and the Call option will bring a profit, and if the market falls, both will bring a loss. To trade a downward market trend (downtrend), you can either go short (through selling) in the underlying market or buy a Put option. If the market falls, both the sell trade in the underlying and the Put option will bring a profit, and if the market rises, both will bring a loss.
Option traders involved in online options trading needs to know more details information on the options market.
As in any contract, there are at least 2 parties in an options contract, the buyer and the seller.The buyer is referred to as the option holder.
However, the Call option will never get stopped-out and loss is limited to the premium paid at open. However, the Put option will never get stopped-out and loss is limited to the premium paid at open.
They are the issuer of all options and they standardized the contracts details in order for an orderly settlement of all options contracts between the brokerage houses and the other option traders.This give the option traders the confidence to trade, knowing that they will be able to exercise their options as and when they want it and a ready market is available.
Your position stays open no matter how the market moves and you do not have to utilise a stop-loss order.
He will profit if the markets rises and will be stopped-out (red line) if the market falls. Hence, buying an option to trade a trend may be useful in a volatile market where managing risk can be difficult.
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