What Is an Options Market?

An options market is a financial marketplace where investors can buy and sell contracts that give them the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a certain date. Options are derivatives of stocks, indices, commodities and currencies. They provide traders with leverage as well as protection against losses due to adverse price movements in the underlying asset.

Options markets offer investors several advantages over other types of investments such as stocks and bonds. For example, they allow for greater flexibility when it comes to risk management since you can limit your exposure by buying put options which will protect you from downside risks while still allowing you to benefit from upside potentials if prices move higher than expected. Additionally, because options have expiration dates associated with them they also provide traders with more time-sensitive opportunities compared to traditional stock trading strategies which require longer holding periods in order for profits to be realized.

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