GAFM GLOBAL ACADEMY OF FINANCE AND MANAGEMENT  ®

3.  Hedging: Options are frequently used to hedge against unfavorable price movements. For example, a portfolio manager can purchase put options to protect against a potential market downturn.

4.  Speculation: Options offer speculative opportunities to profit from market volatility. Traders can buy and sell options to capitalize on price fluctuations without owning the underlying asset.

5.  Income Generation: Some investors use options to generate income by selling covered calls, which involves selling call options on assets they already own.

Conclusion

Leveraged products, derivatives, and options are powerful tools in the world of finance and investing. While they offer opportunities for risk management, speculation, and enhancing returns, they also carry inherent risks. Investors must thoroughly understand how these instruments work, as well as their potential benefits and drawbacks, before incorporating them into their investment strategies. When used judiciously and with a sound understanding of the underlying markets, these financial instruments can be valuable additions to an investor's toolkit.

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