InvestorQ : Why should I trade in options and what are the benefits?
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Lavanya Subramanian made post

Why should I trade in options and what are the benefits?

Answer
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2 years ago


The Futures & Options market is a key market where risks are hedged and traders also take leveraged bets on specific stocks and also on indices. A call option is a right to buy an underlying asset (stock or index) at a predetermined price without the liability to buy. A buyer of the call option pays the premium for this right to the seller of the call option. A put option is a right to sell an underlying asset (stock or index) at a predetermined price without the liability to sell. A buyer of the put option also pays the premium for this right to the seller of the put option.

Typically, you buy call options when you are expecting the price of the stock or the index to go up. Therefore, buying a call options is a bullish signal. Similarly, you buy put options when you are expecting the price of the stock or the index to go down. Therefore, it is a bearish signal. When we combine the puts and calls together we can glean a variety of signals for the market as a whole.