Why Invest in Options?

After the last class, I did some research on investing in options. I came across several articles and most of the talked about the same advantages of investing options. When you invest in options you can invest a small amount of money. You are investing based on speculation or anticipation of market movements. The investments may be achieved through limited means and the potential for loss is narrowed down since you may only lose the price you paid for the option. Some of the advantages of investing in options are the following ones:

• gear their investments
• speculate in price movements or hedge against price exposure in a simple and expedient way
• go short in the market
• make one investment that tracks the entire market through one single transaction

One article gave a table of what the investments strategy would be based on the expectations of the market:
However, it appears as if there are also disadvantages in investing in options. Options can be also seen as short term bets on movements of specific stocks. As it is stated in the below video, it is very possible to lose money quickly investing in options. When you invest in stocks there is value being created so more people can benefit from it. Options are a zero-sum game, your winnings on options are someone else's losses. The video states that investing on options to hedge a portfolio can be a good idea, but doing so just for speculation is a riskier choice.



http://nordic.nasdaqomxtrader.com/trading/optionsfutures/Education/Why_Invest_in_Options_/
http://www.youtube.com/watch?v=Cvt-hoOhBpI