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Published On: Sat, Feb 16th, 2013

Outright Option

An Outright Option is an options trading strategy in which the trader buys or sells options contracts that are unhedged.

An options trader will buy or sell call or put options without the simultaneously placing of a second offsetting contract.  Hedged trades can use corresponding options contracts or positions in the underlying security, which has the effect of limiting both losses and gains.  This hedged trade is called a spread strategy.  Spread strategies are used for risk management purposes, and are considered to be effective in limiting the potential loss of a position.  On the other hand, an Outright Options position is considered to increase the potential for gain, while increasing the risk level of the trader’s account.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

 

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