How Traders Use Calls And Puts To Profit Under Any Market Conditions

1/9/2021 1:05:12 AM

Stock futures are used to protect market positions so that a portfolio can be maintained without adverse effects. However, the cost of opening a position in the future is very high as it requires a margin based on the volatility of the underlying price.

Hence, there is another instrument available in the market, called an option, which can be seen as insurance against such volatility. Options are contracts that provide rights but not obligations.

Investors typically use derivatives for three reasons - to protect a position, increase leverage, or bet on asset price movements. The estate is usually sheltered to protect or insure the property from danger. For example, stockholders buy a put option if they want to protect the portfolio from a decline in value. Shareholders make money when stocks rise, but if stocks fall, they get even lower.

Many selection techniques are used, but they are all based on two main instruments: the call and the put. Using these tools, you can develop a strategy to maximize payments from inventory movements.

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