If any one anticipate a certain directional movement in the price
of a stock (Share) , the right to buy or / sell that stock at a predetermined
price, for a specific duration of time can offer an attractive investment
opportunity.
The decision as to what type of option to buy is dependent on
whether any one's outlook for the respective security is positive (bullish) or
/ negative (bearish).
If any one's outlook is positive, buying a call option creates the
opportunity to share in the upside potential of a stock without having to risk
more than a fraction of its market value (premium paid).
Conversely, if any one anticipate downward movement, buying a put
option will enable any one to protect against downside risk without limiting
profit potential.
Purchasing options offer any one the ability to position yourself
according to your market expectations in a manner such that you can both profit
and protect hedge with limited risk.
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