Often, there are a number of traders with a bad taste left in their mouths after they trade options. More often than not though, this distaste is from a lacking risk management plan – not the instrument. In this article, I am going to introduce two simple concepts for managing risk with your option positions.
Futures vs. Options
Many new traders have a hard time figuring out whether they want to enter a trade using a futures contract or by purchasing an option. Some like the potential futures offer while others like the limited risk that comes with purchasing a call or a put option. This article will explain the two and help you to figure out what scenarios might be more appropriate for trading a futures contract and buying an option.