The good and bad things about trading options - Index binary or forex.

Pros and Cons of Options trading:

Options trading is the exchange of rights to buy or sell stocks in the future. It is basically an agreement between the buyer and seller and works somewhat like an insurance to the buyer, reducing the risk of investment. Options trading is generally used by financial institutions and investment companies but is also used by individuals, though at a much smaller scale of investments. If you have decided to try your hand at options trading, it is important to understand its pros and cons first.

Pros of Options trading:

1. Leverage: With options, a trader or investor has the option to gain leverage in any stock without having to commit to a particular trade.

2. Flexibility: The best aspect of options trading is that options have usability over a wide range of strategies- from high-risk to conservative ones and they can be altered to a level of more expectations that just the rise and fall of stocks.

3. Hedging: With options, an investor is allowed protection of his position against any price fluctuation when it is undesirable to change the present position.

4. Limited Risk: In options trading, the risk doesn’t go beyond the loss of money paid in premiums. In this way, the huge risks involved in stock exchanges can be alleviated.

Cons of Options trading:

1. Liquidity: With the wide variety of strike prices that are available, there is a chance that you may have to suffer due to low liquidity which makes trading difficult.

2. Costs: Trading options costs (in the form of premiums) are considerably higher than underlying stock trading on a percentage-basis and such high costs can nullify profits to great extents sometimes.

3. Complexity: Options trading can sometimes become very complex and may require a good amount of maintenance and observation.

4. Time Decay: Options have a time-sensitive nature and a lot of them expire worthless without bringing you any profit but costing you for your premiums all the same.

Overall, options trading is a great opportunity to devise plans in order to make the most of the market volatility. However, if you think that the cons are more significant, then you should probably go for another means of investment like futures trading.