Friday, November 4th, 2016

Investing in stock Index options

The stock index options are the options which are not a single stock but an index which comprises of many stocks altogether in pool. They were introduced in 1981. The investors and speculators invest in stock index options in order to lower risk to the entire market or some parts of the market without a single stock.

By investing money in the stock market, you may be able to pay off some your debts which you may find it difficult to repay from your pockets. However, you may also opt for debt settlements in case you find that your investment is not sufficient enough for you to repay your debts.

Here is how stock index options work:

1. Preset risk for the buyer – Just like equity options, there are predetermined risks involved in the trading index options. The index option buyer gains leverage since the premium that is paid on the contract value is less. For a small percentage increase in the underlying index gives the index option holder obtain large percentage gains. As such, you can use your profits to pay off your debts. Apart from this, you may choose for debt settlements when you have multiple debts to pay off .

2. Premiums in dollars and cents – The index option premiums are quoted in dollars and cents. In order to determine the price of a single equity index option contract, you need to multiply the quoted premium amount by the contract multiplier. This is the money that an index option buyer will have to pay in order to buy the option and the amount that the index option writer will get on selling the option.

3. Contract multiplier – The stock index options have $100 as the contract multiplier. In order to calculate the cash value of each index option contract, the contract multiplier is being used

4. Rights are reserved – The index options are said to be cash-settled options , the stock holder does not have the right to buy and sell the underlying stocks of the index. But the stock holder has the right to demand for the cash value of the stock from the option writer.

2 Advantages of trading stock indexes

There are 2 advantages of trading stock indexes.

1. Save 30% of your tax – The short-term trading in stocks has high rate of stocks as compared to trading in commodities. The investors who have high tax esto pay off can save up to 30% of tax on short-term gains on the commodities versus stocks.

2. Various plans available for trading – It is easy to use stock index and you do not have to follow any rules, pay any fees and take out any loan for short-selling as you need to do in case of stocks. You may use this contract to make any extra profit or as a part of your investment portfolio.

Thus, by making investment in the stock option trading, you can make good profits and, at the same time, use your investments to pay off your outstanding debts or use a debts settlement services, in case you are floating into the sea of excessive debts, and cannot manage it to repay on your own.

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