Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Trading Options in the UK

Stock-Markets / Options & Warrants Dec 10, 2021 - 12:35 PM GMT

By: Russell_Fenton

Stock-Markets

Some investors are happy with capital growth on their portfolios when trading stock markets, while some are looking for higher returns. There exists an option where there is still potential to make a lot of money, yet with lower risk than buying shares. Options trading can be an appealing method of making money in the financial markets, yet many people fail to understand even the basics of this complex transaction.

Nowadays, many brokers will allow you to sign up for an account and trade options, even without qualifications or financial investments. You will, therefore, only need the required funds to cover the initial margin requirements set out by your broker before you can begin trading.


Greater returns are possible with options trading because of the increased risk involved - therefore, for many investors, this is very appealing. To learn more about options trading, follow online guides explaining how it works and what factors you should consider when opening up an account.

What You Need to Know About Trading with Options

If you want to take advantage of the fact that options can make you a lot of money, but only if the market goes in the directions you expect, then there are certain things that you need to know before making such bets. It is impossible to predict how an option will perform, and therefore you should understand all possible outcomes even when using highly educated forecasts.

Many people lose out simply because they do not understand precisely what they are doing or because a broker has made a mistake. Here is some key terminology so you can understand exactly what we're talking about:

  1. Strike Price - This is the price where the underlying security for your option contract trades should be at while being exercised by your option contract.
  2. Expiration Date - This is the date where your option contract expires and matures and thus can be exercised by you or your counterparty (if assigned)
  3. Underlying Security - This is the security subject to the terms of your option contract. It could be stock options, index options, put options, call options, futures contracts etc.
  4. Exercise - The process where you choose to buy or sell an underlying security at a strike price specified in your options contract. Usually, this will happen around expiry time which occurs on the expiration date unless otherwise extended.
  5. Assignment - The notification sent by exchange or broker to both parties involved with an open option contract notifying them of the exercise
  6. Option Premium - This is what you need to pay to make a formal contract with another party for a specified option
  7. Exotic Options - A type of options contract that is more complex and typically comes with a higher premium
  8. Cash-Settled Contracts - Instruments where cash is paid out instead of shares.
  9. American Style Options - These are options contracts giving their owners the right, but not the obligation, to exercise at any time during its lifetime as long as it remains an open contract.
  10. European Style Options -These option contracts restrict their owners from exercising them until they expire. The expiry process for these types usually takes place on the third Friday of the expiration month.

What is Margin?

When trading options, one needs only to have access to the initial margin requirement set by your broker. These requirements vary depending on what type of investor you are and how much experience you have. An investor might need up to 50% of the value of their portfolio available as collateral, whereas experienced investors may be able to trade with just 10%. A trader might also need additional funds available if prices suddenly change, and they would have to provide more collateral. In some cases, investors need to maintain a certain standing for their deposit to be accepted by the broker.

Although trading options is not something you should jump into without understanding what it entails, once you have picked up enough knowledge on how it works and what factors affect your decisions, there is a lot of money that can be made by exploiting the full potential these instruments offer.

By Russell Fenton

© 2021 Copyright Russell Fenton - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in