Why is options trading not so easy
Trading Options Isn't Hard: The Basics
In Germany, warrants are touted by banks, but options are withheld. This is why some investors still shrink when they hear about options.
And trading options is really easy!
More on the subject:Options are better than warrants: 3 unbeatable reasons
Trading options made easy
Warrants are derived from options and incorporate many of the characteristics of options. If you are familiar with warrants, the reverse is also true.
The basic value, call or put and the term of the option are the most important features, just like with warrants.
Options and Warrants: The Two Main Differences
Warrants are issued by banks, options are not. Options are defined by futures exchanges. This results in these two crucial differences and advantages of options:
1. Options cannot be manipulated in the course
The prices of warrants can be manipulated by their issuers to the detriment of the investor. The issuers also say in the small print of the security description that this will be done.
Options have no issuer, so there is no such risk.
2. Options have no total risk of loss due to the insolvency of an issuer
Warrants have an issuer. Warrants are therefore bearer bonds. When buying, this means: you lend money to the issuer, who then gives you a promise of performance (call or put warrant).
If the issuer becomes insolvent, the money loaned to him will be forfeited. (The customers of Lehman Brothers know a thing or two about it.) There is a total loss for the investor.
Options do not have an issuer, so there is no such risk.
Options and Warrants: Other Differences
Warrants have a WKN or ISIN. These do not have options. Options are clearly defined by the details of call / put, term and strike price.
Warrants are not standardized. This means that there is an unmanageable and hardly comparable variety of warrants. Options are standardized. You know one option, you know all the options. Extremely investor-friendly equipment.
How and where to trade options
While warrants are traded either directly with the bank or mainly via Frankfurt or Stuttgart, options are only traded on the relevant futures exchanges.
The best options brokers - how to maximize your profits many times over
In order to optimally implement the recommendations of the options professional, for example, it is necessary that you can trade options on Eurex and on US futures exchanges.
Therefore, for options trading, you need personal direct access to the futures exchanges on which options are traded.
A service provider / "broker" will provide you with this after he has given you the ability to enter into a future. This intermediary is called a broker.
Whether it is a bank, house bank, savings bank or any other financial institution: the moment you trade directly on the stock exchanges, the chosen agent for the stock exchanges is your broker.
Choosing the right broker will maximize your profits
The financial institutions charge fees for the above-mentioned service - providing your personal access to the options exchanges and forwarding your buy or sell orders for options to the futures exchanges.
These fees are different at the different financial institutions and set differently in their structure.
Readers have told us about three-digit bank charges for buying or selling a single contract of options. For comparison:
Cheap brokers charge between € 1.50 and € 4.00 for an options deal. As you can see: low fees are a very important, downright decisive factor for optimizing your profit.
So that your profits from options trading are not severely affected by unnecessarily high fees, you should choose the broker that is cheapest for you. I recommend the brokers Interactive Brokers, Agora Systems, Lynxbroker, ADIF Brokerage and Cap Trader.
More on the subject: How well do you know about options? Test your knowledge!
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