They offer profit potential and allow investors the ability to control their exposure to market risk. Converting market insight into specific investments or trading action can be time-consuming and fraught with frustration. Deciding which stocks to purchase is a common dilemma.
Sectors can provide a simpler, more efficient, and less costly means of trading.
These contracts allow an investor to focus on market movement without the risk of having to be correct about a particular stock. Sectors give traders and investors a means to adjust their positions easily and quickly in response to market changes. An inherent risk in any securities position is that an overall market decline may send its price downward while an overall market increase may not advance its price upward. A defense against these risks is a sector index option. Investors can rely upon sector options to hedge diversified or industry specific portfolios during periods of market uncertainty, and to reduce risk exposure while maintaining their specific market commitment.