facebookI'm looking towards trying out options. What are your thoughts of using it say if our purchasing power is not high enough? Is there a cheaper way to buy them? And are they more useful during the volatile period during this time? - Seedly
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Nicholas Tan Yi Da

Posted on 13 May 2020

I'm looking towards trying out options. What are your thoughts of using it say if our purchasing power is not high enough? Is there a cheaper way to buy them? And are they more useful during the volatile period during this time?

What are your thoughts of using it say if we cant really afford expensive stocks like apple, microsoft if our purchasing power is not high enough? Do they offer a cheaper way to buy them? And are they more useful during volatile period during this time?

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Discussion (2)

Unfortunately, each option contract is for 100 shares, so if you're selling options, you might have to fork out that entire amount for 100 shares if it gets exercised by the buyer. However, if you're BUYING options, you wont need to have the same amount of margin.

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Yang Teng

Yang Teng

Level 15. Grandmaster

Updated on 14 May 2020

Primary function of options is to hedge or act as an insurance. It is often used for short term trading but not ideal as a long term investment strategy due to time factor. With options, you do not need to have sufficient capital since it relies on leverage (borrowing). That being said, it is multiplies your potential returns and losses.

In the US, you can trade minimum of 1 share per order. The downside to this is that your risk is concentrated into a few companies. An alternative is to just get an ETF which has the companies you want as its underlying.​​​

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