What all beginners must know about options trading in Dubai

If you're thinking about options trading in Dubai, there are some things you should know before getting started. Here's what all beginners need to know about options trading in Dubai.

Options trading can be an excellent way to make money, but it's not without risks. Before you start trading options, you must understand the risks involved. One of the most significant options trading risks is that you could lose all of your investment. This is why it's essential only to invest money you can afford to lose.

Another risk to consider is that the value of your options could decline over time. For this reason, it's essential to have a solid understanding of the market before trading. Lastly, it's also essential to be aware of the fees associated with options trading. These fees can eat into your profits, so it's essential to understand them before you start trading.

What you need to know before trading options

Now that you know the risks involved with options trading, let's look at some of the things you need to know before getting started.

Choose a broker

The first thing you need to do is choose a broker. There are many online brokers out there, so it's essential to do your research and find one reputable and has a good track record.

Open an account

Once you've chosen a broker, you'll need to open an account with them. This is where you'll deposit your money and make your trades.

Types of options

Traders must familiarise themselves with the different types of options. There are two main types of options: call options and put options. Call options give you the right to buy a stock at a specific price, while put options give you the right to sell a stock at a specific price.

Trading strategies

Once you understand the basics of options trading, you can start looking at some of the different available strategies.

The covered call

One popular strategy is known as covered call writing. With this strategy, you sell call options on stocks that you own, and this allows you to make money if the stock price goes down, but it also gives you downside protection if the stock price goes up.

Naked put writing

Another popular strategy is known as naked put writing. You sell and put options on stocks that you don't own with this strategy. It allows you to profit if the stock price goes up, but it also gives you downside protection if the stock price goes down.

Benefits of options trading in Dubai

Here are just a few of the many benefits that come with options trading:

• * You can trade options on a wide variety of underlying assets. Whether you're interested in stocks, commodities, or even currency pairs, there's an option contract available for you to trade.

• * Options offer flexibility when it comes to your investment strategy. Depending on your risk tolerance and investment goals, you can be either an aggressive or conservative trader.

• * Options trading can help you hedge against potential losses in other investments. By buying put options, for example, you can protect yourself from the downside risk in the underlying asset.

• * Options offer the potential for high returns, even on a small investment. Because options are leveraged instruments, you can significantly return on your investment if the underlying asset price moves in the direction you anticipated.

Bottom line

It's always important to remember that options trading is a risky business, so it's important to only trade with money you can afford to lose. If you're ready to start trading options in Dubai, you need to find a reputable broker from Saxo Bank. Once you've found a broker, you can open an account and start placing trades.