Part 3 Learn Institutional Trading

Why Do People Trade Options?

Traders use options for three main reasons:

a) Hedging

To protect their portfolios from losses.
Example: If you own shares and fear a price drop, you can buy put options to act as insurance.

b) Speculation

To profit from price movements using small capital.
Options allow traders to control large positions for a fraction of the cost.

c) Income Generation

By selling options, traders can earn premium income regularly.