Options trading has become one of the favorite ways for smaller traders to participate in the market.
Potential profits are large.
Doubles or triples are not uncommon. The risk is limited to the money you put up to play the game. But as most of us have found, the game can be pretty rough. One thing that makes it so rough, is that the fair value of an option is a complex thing, containing both a part that is based on the option strike price and the underlying stock, index, or commodity price, and a second part called the premium, which is a charge for how much time is left in the option. 5 year subscription to Working Money.