Options trading can be a great way to make some extra money or even to make a living. However, it’s important to understand the risks involved before you get started. In this post, William Schantz walks you through what options trading is and outlines some of the basics of how it works. He also provides a list of the pros and cons of options trading. Let’s get started!
What is Options Trading? How it works?
According to William Schantz, options trading is a type of investing where you purchase the right to buy or sell an asset at a set price at some point in the future. Options can be used to hedge against risk, speculate on future price movements, or generate income.
Options are typically bought and sold on exchanges such as the Chicago Board Options Exchange (CBOE). When you purchase an option, you pay a premium for the right to buy or sell the underlying asset. The size of the premium depends on factors such as the current price of the underlying asset, the strike price of the option, the expiration date of the option, and more.
When you buy an option, you have the right to sell or buy the underlying asset at the strike price before or on the expiration date.
If you sell an option, you are obligated to buy or sell the underlying asset at the strike price if the option is exercised by the buyer before expiration. If you don’t want to fulfill your obligation, you must close out your position by buying back the option (if you sold a call) or selling another call with a higher strike price (if you sold a put).
There are two types of options: calls and puts.
A call gives the holder the right to buy an asset at a certain price within a certain time frame. A put gives the holder the right to sell an asset at a certain price within a certain time frame.
Options are typically used by investors to hedge against risk, speculate on future price movements, or generate income.
Pros and Cons of Options Trading
Options trading can be a great way to make money, but it also comes with some risks. Here are some of the pros and cons of options trading:
– Can make a lot of money in a short amount of time
– Can hedge against other investments
– Offers leverage
– Can be used to generate income
– Risky investment
– Needs careful planning and execution
– Can lose all of your investment if the underlying security doesn’t perform as expected
– Costs can eat into profits
Overall, options trading can be a great way to make money, but it’s important, according to William Schantz, to understand the risks involved. Careful planning and execution are essential to success.
William Schantz’s Concluding Thoughts
Trading options can be a great way to make extra money and protect your portfolio in times of market volatility. We hope this article by William Schantz has helped you gain a basic understanding of what options are and how they work. If you’re ready to start trading, we recommend checking some of the top online brokers out there. Many of them offer free demo accounts, so you can practice before investing any real money.