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I basically had to fill out a form along these lines to be able to do options trading. "Do you know what an option is?", "Do you trade regular stocks now?", "D
by vorpalhex 6y ago
I basically had to fill out a form along these lines to be able to do options trading.
"Do you know what an option is?", "Do you trade regular stocks now?", "Do you understand you may lose all your money with options?".
I suspect my brokerage doesn't even actually review the form, they just want to avoid people complaining that they YOLO'd on a Tesla call and lost everything. Given how easy it was, I am kind of in favor of it - it seems important to have a very obvious and plain disclaimer on high risk strategies like this.
- itake 6y agoI think the naming is important. The questions you listed don't fully describe how sub-optimal margin trading is.
- vorpalhex 6y agoYou can do options trading and not do margin trading - which is my preference based on my personal risk surface. Margin trading comes with a bunch of other things these days - having to post effectively a bond, keep a certain amount of cash in your money market, etc.
- xwdv 6y agoIt's not a big deal. You pay a bit in interest while holding margin, but for the most part there's nothing wrong with having say 30% of your portfolio in margin while the market is rallying. Helps you get much better gains.
- Jorge1o1 6y agoStill, options provide leverage compared to cash equities because the premium is cheaper than the stock price. And just as leverage can magnify profits on the way up, it can also magnify losses on the way down.