Thursday, August 7, 2008

Why trade options?And understand what is options

Hi readers
Alot of investors who keep away from trading or any kinf instruments because they feel that its a ZERO SUM Game. Why? Cause they always thinks that everytime there is a winner in the market means there is a loser. You have to understand that OPTIONS trading is never a sure lose or zero sum chess board. Simple reason is that for options there are lots of ways that they can hedge against each other. Also you and i dun have to know how many options contracts actually expired worthless. Or how many won and lost the chess game in order to figure out the numbers of winnings and losers in the market. So its never a '' When there is a loser, there will be a winner'' It does not mean that way.

Lets put it in a simpler way. If you Buy a contract of straght options CALL. It does not mean that the seller who sells you the contracts loses money. And neither that when you buy it means that you are losing. Why? Cause you can actually convert it into a call spread. Or bought the contract options using spread.What is a call spread? this i will cover in the later part.

We all have to understand this theory. Its unlike trading other counters of direct buy and sell. Its totall unlike shares or scripts. Options there are lots of ways you can play around with. Like PUTs or Calls or spreads. it can actually make you tones of money if you know the systen right. And the application which is the most important. Its totally unlike shares market where when you buy means that the direction will have to be up trend. So when you sell it. You make the profit. Its totally another kind of story for options. We will cover more on this in the later part.


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