Options Trading: Opportunities and Pitfalls for Physicians
With rising market volatility, options trading has become a common topic among physicians exploring side investments.
Options are financial contracts that give the buyer the right to buy or sell an underlying asset at a predetermined price within a set time frame.
Unlike stocks, options do not represent ownership; they are derivatives, meaning their value is derived from another asset.
- Two primary types of options exist: long positions (purchasing options) and short positions (selling options).
- Options can be combined into sophisticated strategies such as spreads, straddles or covered calls.
Each strategy carries unique risk and reward profiles, making a clear understanding of the basics essential before getting started.
Options can offer flexibility, leverage and income opportunities, but they also carry significant risks.
Author's summary: Physicians should understand options trading basics before investing.