Options trading have opened up a new horizon for the traders, which not only helps them in earning good profits out of it but also for protecting their current investments. There is a learning curve involved before one can start options trading, so if you lose your patients and just follow your intuitions for trading options you might have to face the consequences and bear some heavy losses.

Option is a contract between the buyer and the seller that basically gives the owner right to either buy or sell the underlying asset at a predefined price before the contract end date. But there is no obligation for the owner to exercise his rights. There could be different portfolio strategies considering which a trader would invest in options:

• If a trader wants to buy his stocks or asset at a future date or he wants to sell his stocks or asset at a future date, he can purchase call or put options.
• Trader can buy or sell the contract for profit and not for exercising the rights associated with the contract.
• One can also use options for hedging their portfolio. So for example: for any trader if there is a downside risk he can use put options and if he is bearish investor and thinks there is a upward risk he can use call options and protect his portfolio from market movements.

One of the best things about futures and options is the leverage, which means one does not need to invest the whole amount of the derivatives contract. Different derivatives contract would have different margin requirements, based on that one needs to make necessary arrangements before they can trade options.

What would traders need to have before they can start trading options?

1. One would need to have a trading account
2. Brokerage account
3. Required Margin money in the account
4. Online traders would require (I.) Online trading account and a (II.) Trading software
5. Conventional traders who trade through phone will need to have number of his broker handy so that he/she can take advantage of changing market conditions.

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