Friday, June 25, 2021

IS F&O TRADING GOOD ????

FUTURES & OPTIONS are wonderful derivatives that provide enough leverage for trading. Investors can gain larger profits with smaller risk. You just need to adopt some basic option trading strategies for beginners while trading.An option is a contract that gives the buyer the right, but not obligation, to buy or sell an underlying asset at a specific price on or before a certain date.Like stocks, options also involve risks & are not suitable for every trader. Option trading is found to be highly speculative in nature. It carries the risk of losing partial or even entire premium paid by you. You should invest only the partial amount of your total investments in options. However, one of the biggest advantages of option trading is that you can easily hedge your portfolio with them.Hedging with options can limit your potential downside risk. 
In contrast, trading options can be better than trading stocks when appropriately used. However, if the ability to generate relatively reliable analyses and outlook of their underlying assets is not right, both options trading and futures trading may be equally risky.Future trading is capable of producing return on investment and leverage far higher than it can be achieved in trading options.Whether buying call options or put options, the actual risk is limited according to how much money you used to purchase those options. The worst thing that can happen is that the forecast is entirely incorrect, and the choices all go useless.

but our views differ according to the risk profile of the investor. Considering we are talking about trading and not investment,so we suggest -

  • Stock trading only permits day trades. If you want to stay for a longer period, you    need to consider delivery trading.
  • If you hold negative reviews about stocks, consider shorting. Remember, trading       in shares reduces profit-making potential on a good trade.
  •  The losses are minimal as the position size is limited, which is not possible                 under F&O.
  •  But the returns are better with F&O because it offers better opportunities           with  limited   restrictions. The primary constraint is the position size, and traders fear of losing the same.
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