Economics Options And Futures Questions
The concept of leverage in options trading refers to the ability to control a larger amount of assets or contracts with a smaller amount of capital. It allows traders to amplify their potential profits or losses by using borrowed funds or margin to trade options. Leverage in options trading is achieved through the use of options contracts, which provide the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specified time period. By leveraging options, traders can potentially generate higher returns compared to trading the underlying asset directly. However, it is important to note that leverage also increases the risk of substantial losses.