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The flexibility options provide in allowing you to potentially profit from both rising and falling markets make options powerful products. However, options do carry risks. In particular, when writing options you can open yourself up to the risk of potentially unlimited losses.

Benefits of using options

Options trading can be an effective way of generating wealth, whether as part of a wider investment strategy or as a standalone technique. Their uses in both rising and falling markets can make them powerful products. Like any investment, options have risks you need to understand. You should seek independent advice from a professional adviser before investing.  

Options are classed as either call (the right to buy) or put (the right to sell).

You can generate wealth from rising and falling markets. You could take a call option to profit from a rising market – locking in a buy price now and benefiting from the underlying security’s capital growth over time. On the other hand, you could take a put option to benefit from a falling market, by locking in a high sale price before values fall.

Risks of using options

Options do carry risks. In particular, when writing options you can open yourself up to the risk of potentially unlimited losses.

Writing options can be considerably riskier than taking options as even though your premium is fixed there is the potential to incur losses greater than that amount. For example, if the market moves against your position, your losses can escalate quickly. Writing call options if you don’t own the underlying securities is particularly risky, as you will have to provide the underlying securities if you are exercised against.

ASX Online Courses

Both courses have 10 modules with each module taking 20-25 minutes to complete

Reach Markets Trading Courses

Complete suite of online courses from beginner to advanced options education plus trading courses on technical analysis and trading systems. (Free Sign-Up)

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Live Online Webcasts

Two monthly trading webinars designed for you to ask questions live while presenters walk through an introduction to options and advanced options trading.  (Free Sign-Up)

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Options Trading Game

Challenge your knowledge of options and sharpen your trading skills.

Next Game: starts 28 June (Rego opens 14 June)

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