How Can Options Trading Help Me Achieve Financial Freedom?
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4 weeks ago
Opening an account with IG gives you access to the best platform for options trading
If you have wealth to invest and see opportunity in volatility, options trading may well open up new doors. But if you’re not entirely sure what options trading entails, we’ve got you covered: we’ve teamed up with IG to explain exactly what it is, plus how it could help your pursuit of financial freedom.
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. You could lose more than your original investment.
What Is Options Trading? (& Why Is It Beneficial?)
Buying and selling options (ie options trading) creates contracts that give you the right – but crucially not the obligation – to buy or sell an underlying asset at a set price if it changes within a specific timeframe. This means you can use options to speculate on the market, and even benefit from its volatility.
As IG explains: ‘Let’s say that you expected the price of US crude oil to rise from $50 to $60 a barrel over the next few weeks. You decide to buy a call option that gives you the right to buy the market at $55 a barrel at any time within the next month. The price you pay to buy the option is known as the “premium”.
‘If US crude oil rises above $55 (the “strike” price) before your option expires, you’ll be able to buy the market at a discount. But if it stays below $55, you don’t need to exercise your right and can simply let the option expire. In this scenario, all you’ll have lost is the premium you paid to open your position.’
With an IG account, you can trade options in two ways:
- Trading listed options with a US options and futures account, where you can implement basic or complex strategies
- Trading options with spread bets or CFDs, meaning you take a position on the underlying options price, not entering into the options contract directly or employing complex strategies.
Who Are IG?
IG is a world-leading online trading platform designed to give individuals access to more than 17,000 financial markets. With almost 350,000 clients worldwide, IG is a trusted platform to seize financial opportunities with spread bets, CFDs and opportunities to invest in thousands of shares and EFTs. With pro wealth managers also by your side, it’s the best place to achieve your trading goals.
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. You could lose more than your original investment.
Why Trade Options With IG?
There are a plethora of reasons why IG is a great choice if you are looking to start options trading. For one, the friendly accounts team is on hand as soon as you decide to sign up, available to walk you through IG’s different products and platforms one-to-one.
Don’t worry, the contact doesn’t end there: with an IG account, you can get support from the highly skilled trading services team whenever you need it, talking by phone, email or on X (formerly Twitter) 24 hours a day (closed between 10pm Friday and 8am Saturday).
Best of all, IG provides analytics tools so you can delve into the nitty gritty of what makes your trading successful and what might be holding you back. When you sign up to IG, you join the IG Community, meaning you can also chat with fellow traders and the IG team for tips and tricks on achieving your trading goals. If you’d like to learn more and develop your trading skills, there’s also the IG Academy, brimming with online courses, webinars and seminars that account holders can access for free.
Spotlight: tastytrade
Developed by options traders who wanted to empower ambitious and self-directed traders, tastytrade is a high-tech trading platform offering options, futures, stocks and more. Having been founded in 2017, tastytrade joined the IG Group in 2021 and can be accessed straight from the My IG dashboard so you can continue pursuing personal independence and financial freedom.
‘I’ve been working with IG for three years,’ shares IG account holder Jan Doedens. ‘I have been exposed to a number of instruments to trade with, and the latest addition has been TastyTrade. Tasty to date is looking like one of the best as I navigate the new world of margin trading with the support of Luke at IG and others from Tasty Trade. The world of spread betting and margin trading is lonely and intimidating when you start, but IG and Tasty have worked hard to make me feel supported and part of the community. Thank you for taking me on this journey and the opportunity to grow as a trader and investor.’
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. You could lose more than your original investment.
How To Make Your First Options Trades
We asked the experts at IG exactly how to get started…
- Understand the terminology: It’s important to familiarise yourself with what you’re dealing with, including: holder and writers, premium, expiry, in the money, out of the money, break-even point and more.
- Identify what determines the option’s price: As a general rule, the more likely the underlying market price will be above or below an option’s strike price at its expiry, the higher its value will be. However, three main factors influence the value of an options contract: the different between the underlying price and the strike price; the time to expiry; and the volatility of the underlying.
- Learn The Greeks: The Greeks are measures of individual risks associated with trading options, each named after a Greek symbol, including Delta, Gamma, Theta, Vega and Rho. Understanding how they work can help you calculate the risk involved with each of the above variables affecting the price.
- Choose a strategy: Numerous strategies can be used when you’re trading options, each achieving different results. For example, buying a call option is one of the simplest and most popular strategies because you can’t lose more than the premium yo pay to open if the option expires, while trading staddles, for example, is a bit more complicated.
- Choose a market: Will it be US-listed options (and futures) or will you trade options using spread bets and CFDs? The former opens you up to stock options (like Apple and Tesla), index options (including S&P 500 and Russell 2000) and ETF options (like SPDR S&P 500 ETF Trust (SPY) and iShare Russel 2000 ETF (IWM). The latter includes forex options (including majors like EUR/USD and GBP/USD), share options (including FTSE 100), stock indices (such as Wall Street), commodities (like metals and energies) and OTC options.
Find IG’s guide to option’s trading here. Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. You could lose more than your original investment.
Get Started
Discover more and start options trading at iggroup.com/uk
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
