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In Options trading, you buy a contract which gives you the right but not the obligation to buy the underlying at a specified price within a specified period. In stocks trading, you buy stocks that give you partial ownership in a company.
Options Trading Vs Stocks Trading
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Options Trading |
Stocks Trading |
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You pay the premium which is a fraction of the cost of the underlying. |
You pay the actual price of the stocks. |
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You can profit from a downward, upward and a sideways movement of the underlying. |
You profit from upward movement of the underlying, except in case of intraday trading. |
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Risk can be managed. |
The risk is unlimited. |
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It has a definite time period. |
You can hold it as long as you wish. |
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Involves no delivery and cash settled. |
Involves delivery of the stocks. |
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