What are the risks associated with options trading?
An example of an AI chatbot conversation about options trading risks.
What are the risks associated with options trading?
Options trading can be risky due to factors like market volatility, time decay, and leverage.
Can you explain how leverage increases the risk?
Leverage allows you to control a larger position with a smaller amount of capital, which can amplify both gains and losses.
What is time decay and how does it affect options?
Time decay refers to the reduction in the value of an option as it approaches its expiration date, which can lead to losses.
Are there strategies to mitigate these risks?
Yes, strategies like hedging, diversification, and using stop-loss orders can help manage risks in options trading.
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