Option Trading

Leverage and Speculation in Option Trading

Options provide leverage, allowing traders to control large positions with small investments. For instance, buying a single call option can represent ownership of 100 shares, magnifying both profits and losses. Speculators use this leverage to capitalize on short-term market moves. However, leverage also increases risk—if the market moves against the position, the entire premium can be lost. Successful speculators use strict risk management, combining analysis of volatility, momentum, and time decay to optimize entries and e