Advance Option Trading Strategies

Risk Management and Leverage:
Options are a versatile risk management tool because they allow hedging against price fluctuations. For example, buying put options can protect a stock portfolio from declines. They also offer leverage, letting traders control a large position with a relatively small investment, magnifying potential gains—but also losses. Unlike stocks, options have a limited lifespan, which adds a time-sensitive component to trading decisions. Traders must balance risk, potential reward, and timing carefully. Proper use of options can enhance returns while mitigating losses, but misjudgment in strategy or market direction can lead to rapid capital erosion.