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How options can fit a strategy

Options are derivative contracts that can complement many trading approaches. When you buy an option, you obtain the right—without the obligation—to purchase or sell an underlying instrument at an agreed price before or on a set date. Calls typically express a view on rising prices; puts can express a view on falling prices or serve as protection.

Used thoughtfully, options may help with hedging, income generation, or targeted exposure with defined upfront cost. However, outcomes depend on factors like direction, timing, and volatility.

Important risk considerations

• Complexity & timing: Option values are sensitive to time decay and volatility changes.
• Leverage cuts both ways: Small moves in the underlying can lead to outsized gains or losses.
• Capital at risk: Buyers can lose the entire premium; writers (sellers) may face losses that exceed the initial credit and can require additional margin.
• Market volatility: Underlyings can move abruptly, and liquidity can vary, impacting pricing and execution.

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