Although options (derivative) trading can afford the investor potential returns with multiples many times greater than traditional buy-and-sell equity approaches, make no mistake – trading options outright (without a hedging model) carries with it substantial inherent and intrinsic risk. Hence, it is imperative for the individual to understand and comprehend exactly what he is getting himself into before engaging in any kind of options trading strategy. Yes, the rewards experienced with options trading can be monumental however, the level of risk is critically escalated compared to more risk-averse and conventional investing and trading strategies. Straddles and strangles provide the investor with two enhanced options strategies to implement and execute when an expectant causal event will significantly move the underlying stock price. Each approach offers an effective hedging model affording the investor an opportunity to actualize profits by taking advantage of price movements in either direction
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