Whether you’re looking to generate an income stream, hedging your risk or increasing leverage, a trading strategy that includes options can provide you with the tools you need to achieve your goals.

Options trading uk is the act of buying and selling contracts that give you the right (but not the obligation) to buy or sell an underlying asset at a specified price within a set timeframe. Typically, you’ll use them to speculate on market direction, but they can also help you manage your risks and hedge against market volatility.

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As a trader, you can choose from call and put options that are based on a wide range of tradable assets, including shares, currencies, commodities, bonds and stock market indices. Unlike traditional share trading, which requires you to own the actual shares, when you trade options with us as spread bets or CFDs, your risk is always limited to the margin you pay to open a position.

When a trader buys an option, they’re paying an upfront premium in exchange for the right to enter a long position when the option expires. This premium is determined by the probability that the underlying market price will move above or below the strike price at the option’s expiry. For this reason, the buyer of an option has a potentially unlimited profit potential, but the seller has a much lower risk because they know their maximum loss upfront.