The term Option refers to a financial instrument that is based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset. Unlike futures, the holder is not required to buy or sell if they decide against it. This makes options contracts attractive for investors who are looking for flexibility and control in their investments without having any obligation attached with them.Options can be used by investors in a variety of ways depending upon their investment objectives and risk tolerance levels which include hedging strategies, earning income from premium payments, speculating on price movements and more recently leveraging into larger positions at lower capital outlay costs than would otherwise be possible with other instruments like futures contracts.Options provide an investor with greater control over how much money they stand to make/lose when compared with other instruments since there is no obligation involved unlike futures where you have an explicit commitment once you enter into a position.When trading options, it’s important that traders understand all aspects associated including expiration dates & times; exercise prices; margin requirements; settlement procedures etc., so as not put themselves at unnecessary risk while attempting complex trades involving multiple legs across different markets & exchanges simultaneously. It’s also recommended that traders conduct adequate research before entering into any trade using this instrument as even though its usage may offer certain advantages ,it also carries higher risks when compared to traditional equity investing.
