Basics of Options Trading FAQs

How Stock trading is different from Options trading ?

Option trading is where you purchase a contract that gives you the right, but not the obligation, to buy the underlying at a specific price within a certain time period. Stocks trading allows you to buy shares that allow you to have a partial ownership of a company.

Options Trading Vs Stocks Trading

Options Trading

Stocks Trading

The premium is only a fraction of what the underlying costs.

Stocks are sold at the current price.

Profitable movements of the underlying can be either downward, upward or sideways.

Except in intraday trading, you profit from the upward movement of the underpinning.

You can manage risk.

There is no limit to the risk.

It is a time-definite period.

It can be kept as long as you like.

This includes no delivery or cash settlement.

This includes the delivery of stocks.

  


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