According to Rowan Relton, options are powerful financial tools utilised by investors and traders. They can increase leverage, provide income, and modify market risks. Some investors are surprised to learn that when options are used alongside other investments they can reduce overall market risk.
Traders use options in a huge variety of ways. Some are attracted to the one-sided and limited risk of buying options. Others act as market-makers, optimising profits by facilitating investors’ option trading. The mathematics underlying options is complex, but anyone who can add, subtract and calculate a percentage return can harness the power of options to increase overall market returns, Rowan Relton says.
What is an option?
An option is an agreement between two parties. Although there is a huge variety of options, they all involve a seller of an option (the writer) granting certain rights to the buyer of an option (the taker) in return for a payment (the premium), says Rowan Relton.
