Every single Forex trader or investor sooner or later comes up with the following question: Is it possible to reduce multiple trading risks? Every trader knows that trading Forex is very risky. Without a profitable trading system, skills, experience and sound money management it is possible to lose everything at a time.
Is there an opportunity to trade Forex, commodities and stocks without being exposed to considerable risks?
Some experts are sure that option trading is less risky but no less profitable than conventional Forex trading. Is it true? Let’s find it out.
Options
According to the Department of Option Trading of , options are derivative financial instruments. An option represents a contract for a future transaction on a specific underlying asset at a predetermined price (also known as “the strike”). The buyer of the option gets the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfill the transaction.
There are European and American options. The owner of an American option can sell or buy the underlying asset at any time until expiration. The owner of a European option can sell or buy the underlying asset at only on the expiration day.
There are 2 types of options: a call option and a put option. A call option gives the right to buy the underlying asset while a put option gives the right to sell it at a predetermined price (the strike).
Trading Example:
Market Leader decided to interview Ilya Tarakanov, a student. He has already earned over $15 000 over a couple of months.
“I became a trader in August 2010. As a beginner, I tried to scalp US stocks. Then I switched to volume trading, futures and Forex. But I tried in vain. There was no success in trading.
In April 2011 a friend of mine invited me to to study at the Department of Options. A couple of months later, I started looking at the market from a different perspective. It took me a few weeks to realize the potential of option trading. In May I switched from demo-trading to real-money trading. First I increased my trading capital by 10%, then by 50% and more. Now I have 12 open traders. All of them are winners. But there is no point in closing them for taking profit because the margin requirements are less than 40%.
I was utilizing option-selling approach developed by the Department of Options of .
During the first 3 months I showed breakeven performance as selling options at far strikes gave me a safety factor.
Pay attention to the charts below. The y show why I once started trading options. Some trades started as losers because some of my forecasts had failed but eventually all my trades ended as winners.”
The charts aregiven in order:
It should be noted that the bigger the investment capital is, the wider range of opportunities the trader gets. If you want to find more details on the option trading approach developed by , visit its forum for traders and investors.
For an investor, buying an option means investing with predetermined low risks. The price of the option is the max amount of money an option trader can lose.
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
In your opinion, is option trading really more profitable and less risky than conventional Forex trading?
