Option
| An option is a financial contract that gives its holder the right to buy or sell an asset at a specified price within a certain period of time. Options are typically used as a way to hedge against risk or to speculate on the future price of an asset. When you buy an option, you are not obligated to purchase or sell the underlying asset. However, you do have the right to do so if you choose. If you decide not to exercise your option, you will simply let it expire. Options are a versatile tool that can be used in a variety of ways. For example, you could use options to: Hedge against risk: If you own a stock that you think might go down in value, you could buy a put option. This would give you the right to sell the stock at a set price, even if the market price falls. Speculate on the future price of an asset: If you think a stock is going to go up in value, you could buy a call option. This would give you the right to buy the stock at a set price, even if the market price rises. Generate income: You could sell a call option on a stock you own. This would give someone else the right to buy the stock from you at a set price. If the stock price never rises above that price, you keep the option premium as income. Options are a complex financial instrument and they are not suitable for everyone. Before you decide to trade options, you should carefully consider your investment objectives, level of experience, and risk tolerance. |
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