What are the benefits of trading options?

by Houghton and Atkeson   06/23/08
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Q: What are the benefits of trading options?

A: Options can be used for speculation or for insurance for a long stock position. You can buy calls and puts without having to own the underlying shares on a bet that the stock will go up or down. And if you own the underlying stocks or other commodities, then you can buy or sell options to generate additional income or to control risk. Similarly, if you need to buy an asset in the future, you can buy an option to lock in a price and then purchase the stock at the pre-determined price (the strike price) during the life of the options contract.

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