What You Need to Know About Options Trading

If we see today, the internet has created many opportunities for traders to invest their money. There are many different financial instruments that financial brokers set up online that made it easy for traders to invest.

Traders can now buy or sell forex, CFDs, indices, and commodities easily among other assets from anywhere, their homes or offices, Then the option is introduced by the brokers.

Traders adopted this new form of trading instruments very fast all over the world.

Why?

Many claimed that it’s a form of gambling.

But is this really true?

Is IQ option gambling?

This guide will discuss what options trading is all about.

Overview of options

The value of options is linked to the value of the underlying asset which in short term is known as a type of derivative security. So as an options broker you are not claiming ownership of the underlying asset. Instead, you only predict if the asset’s price will rise or fall over a fixed period of time.

So, while working on options your main objective is to predict the rise or fall of the price of an underlying asset within a certain time.

Let’s take a look at how this works.

Trading options on IQ Option

On the IQ Option trading account, start by clicking on the plus (+) button and selecting options. Now choose your asset. EUR/USD currency pair will be used with a 5-minute interval candle as an example.

Next, select the trade expiry time.

Next, enter the amount to trade.

Finally, based on your analysis, select either higher or lower.

Is options trading a form of gambling?

Like gambling, options trading can make you money or not.

Many people claim that IQ Option trading is like gambling and you need only luck to make money. But in reality, IQ Option is much more than deciding whether to press the higher or lower button.

As an options trader, you will need to apply the skills used by traders participating in other financial markets. For that, you should be skilled at technical analysis as well as reading the price charts. With that money management and emotional control are also essential to becoming a successful options trader.

Others will argue that options trading is prone to broker manipulations. That is, the broker works behind the scenes changing prices at will to their advantage. This is highly unlikely because the price charts used by options traders are the same charts used by traders investing in other financial instruments.

Options trading unmasked

Note that, If there’s someone on the other side selling, you can only buy an asset when trading other financial instruments such as fx or stocks or vice versa.

In the case of Options, it is a bit different. Here you predict whether the price of an asset will rise or fall over a specified period of time. So, according to your prediction you buy or sell. If you are a buyer then the seller will be your broker – not another trader. therefore your broker has the right to set the return on your winning trades.

As such, brokers will rarely manipulate prices to ensure that all traders have losing trades.

Many traders consider this strategy as a quick mode of making money. Although, In other markets, knowledge is important for options traders to trade. Skills like price chart reading,  proper money management, and emotional control are also required. Without all this option will simply be a form of gambling.

Good luck.