Options are considered a derivative and a type of leveraged financial investment. Often, only a portion of a contract’s value is required for trading. Although this leverage may produce greater returns, it is possible to lose more than the amount of the initial position. Options traders must carefully manage their positions and be able to respond effectively to changes in market volatility.
Options trading can be profitable but it is a complex subject and it is not for everyone. Anyone interested in understanding options trading can find a great many publications and educational resources. The Options Clearing Corporation publishes a document entitled The Characteristics and Risks of Standardized Options that describes the nature and risks of options trading. Major online retail brokers also provide retail customers with a variety of introductory articles and lessons along with more advanced information. In addition, there are numerous internet resources, including YouTube.Com videos that discuss various options trading topics. As with any internet information, it is important to seek a credible source and consider all claims carefully. Investors should obtain appropriate professional advice before acting on or relying on the contents of any website.