Modern investors and traders have more markets and vehicles to trade than ever before. Although each trading vehicle has its pros and cons, there are few that provide the flexibility of options.

An option contract simply gives the holder the right, but not the obligation, to be long or short the underlying contract at a certain price at a specific date in the future. Options can have several advantages over other trading vehicles and may be used by investors to accomplish a variety of objectives. For example, take a closer look at thestockdork.com. You’ll encounter accurate information and expert advice on the best stocks to trade and specific routines to get the most out of them.

Outlined below are three of the biggest potential advantages of options trading:

1. Leverage

An option contract on a stock controls the right to buy or sell 100 shares at a certain price at a specific date. To purchase an option, the investor pays a premium to the option seller. This premium is often significantly less than what it may cost the investor to buy or sell 100 shares of actual stock. For example, if stock ABC is trading at $50, an investor may have to shell out $5000 to purchase 100 shares. A two-month option on the stock, on the other hand, may only cost $1500. The investor can then control the same amount of stock using less capital. The capital saved may then be used for other investments. Continue reading →