Two ways to express a view on a stock or a given industry in the financial markets are to buy it (long) or sell it (short). However, investors can gain leverage in these bets to amplify their returns should they get their views' direction and timing right. This is done through stock options, but there is a caveat to trading these instruments.
Investors should be aware that the leverage and timing aspect of options creates a lot of added risk over just owning and trading an individual stock. That is why they should pay attention to high-conviction trades in these products since the stakes are that much higher for those placing these underlying bets. Today, some traders choose to go with put options, which profit when and if the underlying asset declines in price by a certain date.
