Stock options are generally complex so the failure rate in stock option transactions is somewhat high. Many traders use stock option to leverage their position in market-timing. Usually, the traders buy call options if they think the underlying stock will move up, or they buy put options if they believe that the underlying will fall.

However, buying calls and puts is essentially buying wasting assets because of the expiration dates attached to stock options. So a trader needs to be aware of the potential risks and rewards associated with the strategies that he undertakes. Also, it is very important to have a planned and structured approach toward trading stock options.

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