By choosing your strike and trade size you get greater control over your leverage than when trading spot markets. If you're a UK trader who's buying call or put options as spread bets or CFDs with us, your risk is always limited to the margin you paid to open the position. Hedging with options allows traders to limit potential losses on other positions they might have open. Say you owned stock in a company, but were worried that its price might fall in the near future. You could buy a put option on your stock with a strike price close to its current level.

Traders use some specific terminology when talking about options. There are three main factors affecting the premium, or margin, you pay when you trade options in the UK. The two terms are used interchangeably below. The Greeks are measures of the individual risks associated with trading options, each named after a Greek symbol.

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Understanding how they work can help you calculate the risk involved with each of the variables that affect option prices. Popular options trading strategies include:. Use daily and weekly options if you want to take positions on markets quickly, but with greater control over your leverage than when trading other products — such as trading CFDs or spread betting on spot markets. Find out more about trading daily and weekly, monthly and quarterly options.

The type of option you trade, and whether you buy or sell, will depend on whether you want to speculate on the market rising or falling. Remember that buying options is limited-risk, while selling is not. If the option is in the money, you may wish to close it before the expiry to maximise profit.

Understanding options trading

Like shares, listed options are traded on registered exchanges. You have to meet certain requirements to buy and sell options directly on an exchange, so most UK retail traders will do so via a broker. When you trade with an options broker, you deal on their platform — usually paying commission on each trade — and they execute the order on the actual exchange on your behalf. Tax law may differ in a jurisdiction other than the UK. Options trading is the buying and selling of options. Options are financial contracts that offer you the right, but not the obligation, to buy or sell an underlying asset when its price moves beyond a certain price within a set time period.

Your maximum risk is the premium you pay to open. However, your maximum risk is potentially unlimited if the market moves in favour of the option holder. Yes, you can trade stock options. Rather than owning the actual stock, you have the right to buy or sell it at an agreed price on a specific date. Yes, there are various options trading strategies which involve simultaneously buying a put and a call option on the same market.

These include straddles, strangles and spreads. Take a look at our strategy article to find out more. Interested in opening an account? Contact or newaccountenquiries. Email newaccounts. Marketing partnerships: marketingpartnership ig. Professional clients can lose more than they deposit. All trading involves risk.

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2. Making Your First Option Trade?
3. Options Trading.
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Past performance is no guarantee of future results. The information on this site is not directed at residents of the United States, Belgium or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Careers Marketing partnership. Inbox Community Academy Help. Log in Create live account. Related search: Market Data.

Market Data Type of market. Markets to trade Options trading What are options and how do you trade them? Daily options trading Weekly and monthly options trading. What are options and how do you trade them? Find out more. Practise on a demo. Create live account.

How to Become a Day Trader with $ Step-By-Step Guide • Benzinga

Log in. What is options trading? Open an account to start trading options today. The essentials of options trading Take a look at the key types, features and uses of options: Call options Put options Leverage Hedging. What are call options? What are put options? What is leverage in options trading? How can you hedge with options? How to trade options in the UK Options trading terminology What moves options prices Learn the risks Options trading strategies Markets to trade Market movement time frames Placing an options trade Monitoring positions.

Understand options trading terminology Traders use some specific terminology when talking about options. For a call, the holder has the right to buy the underlying market from the writer. For a put, the holder has the right to sell the underlying market to the writer Premium: the fee paid by the holder to the writer for the option.

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General Investing Online Brokerage Account. Life events. Life priorities. Investor education. Tools and calculators. Open an account. Contact us. Open an account with Merrill. Footnote 2. Options involve risk and are not suitable for all investors. Certain requirements must be met to trade options. Before engaging in the purchase or sale of options, investors should understand the nature of and extent of their rights and obligations and be aware of the risks involved in investing with options.

Please read the options disclosure document titled " Characteristics and Risks of Standardized Options PDF " before considering any option transaction. You may also call the Investment Center at A separate client agreement is needed. Multi-leg option orders are charged one base commission per order, plus a per-contract charge.

Be inspired with new ideas Generate option trade ideas by strategy or sentiment, analyze and understand your risk exposure, all with one tool. Already have an account? Log in now to explore strategies. Simply enter a symbol, see the trend, state your view, see options strategies and deploy. Access in-depth reports like the US Option Overwriting Trade Ideas report, which highlights single-stock covered call writing opportunities, generated through quantitative screening. Powerful screeners Explore the security universe for option opportunities or stock attributes that meet your customized criteria.

Footnote 4. What are options? How do they work? What are the Greeks? We can help build your foundation and even learn what the pros use. Footnote 5.