Why Trading Options Has Become So Popular

Why Has Trading Options Become So Popular?

Stock Options are not some new scheme or newfound loophole in the financial marketplace. Options offer diversity and opportunity to better serve your trading decisions. Options do not build upon the foundation of effectively trading in the Stock Market because they are, in fact, a vital component in the foundation of successfully trading in the Stock Market. As trends in the market come and go, the popularity and appeal of trading options only increases, because of the specific evidence (which I’m about to divulge to you) that proves their undeniable worth and inherent opportunities in our current transparent and globally reaching world of finance.

Trading options, if not already implemented, is the sleeping giant in your diversified trading arsenal. More importantly, market conditions and requirements provide a welcoming starting point, in the fact that it takes a relatively low amount of capital to start trading options. Further proof of this validity and opportunity is the fact that more and more stocks are offering the ability to trade options, and a diverse selection of stock options (ex/ weekly; monthly; long-term leaps; etc.), at that. As the self-directed traders that we are, within our current efficient and accessible market, it has never been easier to facilitate orders to buy and sell options. 

Thanks to the high liquidity and volume there of, and with the aid of powerful software-based trading platforms (E-Trade, ThinkorSwim by TD Ameritrade, Interactive Brokers), we are at the point where almost every single exchange in the world is offering options. As Nathaniel Popper states in his New York Times article dated May 24th, 2014, “At TD Ameritrade, which has been the most aggressive, derivative trades accounted for about 40% of all customer-trades last year.” same article, providing only further proof that trading options occurs all over the map and with good reason.

The benefits that come from successfully trading options are in direct relation with the diversification of your portfolio. When the proper strategy is applied you can also successfully navigate in a sideways market.  This is great for self-directed traders because sideways markets are consistently emerging, year after year. Compared to trading stocks, the time frames associated with options allow for higher returns on capital in a relatively shorter amount of time. Not to mention, that you have the ability to succeed when stocks are going down.

The popularity of options trading within the overall market is widespread and readily apparent. It is an easily identifiable fact that nearly every brokerage firm is offering options to their accounts of every shape and size. In his article concerning these matters, Nathaniel Popper states that “As the stock market soars to new heights – E-Trade. Ameritrade, & Charles Schwab are advertising the potential rewards of options, which give buyers the right to buy or sell stocks at predetermined prices in the future.”

It is also worth noting that with the popularity and everyday use of options trading, comes questions of safety and regulation.  Now, regulatory exchanges have imposed strict regulations and guidelines for trading options. Aside from the standardization of 1 option contract controlling 100 shares of stock, there are also safeguards to inform, educate, and protect people on every side of the trade. Regulatory exchanges go to lengths to ensure that the customer is aware of, and educated on – the pitfalls and promises of options trading. For instance, when you go to open nearly any brokerage account, you need to provide confirmation that you have read and understood an important document titled The Risks of Standardized Options. Educating yourself and staying informed is paramount when it comes to making these financial decisions on your own, as a self-directed trader. The current popularity of options did not occur by accident, and the opportunities that await within the options world are ever increasing. When properly trained and educated at the retail trader level, implementing options trading strategies will diversify, insulate, and strengthen your portfolio. Through financial education comes confidence and through that confidence comes success

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