Diving into the world of option trading can be confusing, especially for beginning traders. The first step to trading options is opening an options brokerage account. This article provides a set of guidelines for picking the right options brokerage account depending on your needs and trading style. Because technology has broken down iss, infoThis article needs attention from an expert on the subject. Please add a reason or a talk parameter to this template to explain the issue with the article.
Consider associating this request with a WikiProject. (April 2012)In finance, margin is collateral that the holder of a financial instrument has to deposit with a counterparty (most often their broker or an exchange) to cover some or all of the credit risk the holder poses for the counterparty. The required minimum equity must be in the account prior to any day-trading activities. Suppose you buy some stock options. You will risk much less money than you would if you bought the shares or sold the stock short, but you stand to make just as much profit.
The catch is that your risks are much greater. For some types of options transactions, your risk is unlimited. For options trades with unlimited risk you must have a margin account. The Nature of OptionsOptions are contracts in which the buyer may purchase or sell a security such as shares of a stock for a guaranteed amount called the strike price. The buyer may exercise the option at any time until the date it expires but is not obligated to do so.
The seller of the contract is called the option writer. Licwnse writer is obligated to fulfill the option contract optiond it is exercised. When you trade options, you may buy contracts or you may write them.
What is a margin account with options trading license