This Is the Single Most Dangerous Move You Can Make as an Options Trader
Sometimes options contracts help you reduce the risk in your portfolio. For example, buying puts is a simple way to insure yourself if you need to off-load a losing stock. Buying calls can limit your exposure if you think a stock's price will rise, but you don't want to take on the risk of actually investing in the stock.
But sometimes options are used for pure speculation. The contracts are so risky that they're more gambling device than investment strategy. Selling naked calls is the riskiest strategy of all. In exchange for limited potential gain, you assume unlimited potential losses. Here's what makes them so risky.
Image source: Getty Images.
Source Fool.com
