Risk” thinking that you are not going to lose a lot of money because
the risks are limited. “Limited Risk” is not to be interpreted as it is,
what it actual means is that as compared to buying or shorting a
stock, the risk is limited. If you buy a particular stock for $50, you risk
is $50 because the company can go bust which is most unlikely to
happen but it can go down. Buying the stock option instead will limit
your loses for you may only pay $5 for it. And comparing both, buy
option seems to be a logical choice because you only have to pay 10%
of the stock’s price; so naturally, you don’t mind risking it all. It is this
mentality that most options trader loses money.
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