What is the primary goal of using options in trading?

The primary goal of using options in trading is to manage risk and leverage investment opportunities. Options provide traders with the ability to hedge against potential losses in their portfolios, allowing them to mitigate risk associated with price fluctuations. For example, if an investor holds shares of a stock and fears a decline in its price, they can purchase put options, which give them the right to sell the stock at a predetermined price, thus protecting their investment from significant losses.

Additionally, options can be used to leverage investment opportunities. Investors can control a larger number of shares with a relatively smaller amount of capital by using options. This means that traders can amplify their potential returns, as options can provide significant gains if the underlying asset moves favorably.

This dual purpose of risk management and leveraging opportunities makes options a versatile tool in the trading landscape, appealing to both conservative and aggressive investment strategies.