Profit Potential of Option Trading

As an options trader or someone who plans to invest in options trading, it is important that you get to understand what the profit potentials of using options in trading are.

The moment that you purchase an option, you will be paying the option premium for the right to buy that certain stock. So if the stock moves up by expiration day you will only lose that option premium. If the price of the option goes down then you will be simply out of the option premium. The good thing is that you never lose more than the premium and any commissions that you paid.

If the price of the stock moves up past the strike price then you will start earning that money back. If it moves up high enough then you can turn in a profit. The potential of a call option actually has no limits. According to Zecco as long as the underlying stock price increases continuously then the value of your option will increase continuously as well. A single option contract controls 100 shares of stock so the value of your options will increase up to 100 times as fast as a single share of that particular stock.