Options Trading
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Options trading is when you buy or sell an underlying asset at a pre-negotiated price by a certain future date.
Trading stock options can be complex — even more so than stock trading. When you buy a stock, you just decide how many shares you want, and your broker fills the order at the prevailing market price or a limit price you set. Options trading requires an understanding of advanced strategies, and the process for opening an options trading account includes a few more steps than opening a typical investment account.
“You can use options to speculate and to gamble, but the reality is ... the best use of options is to protect your downside,” he says. "Options are one way to generate income when the markets aren’t going up.”
According to the Options Clearing Corporation, there were 939 million options contracts traded in March 2022, up 4.5% compared with March 2021. It was second-highest trading month on record.