Shorting their owned stocks is quite common for stock traders when they sense that the market value of the stock they have will go down. However, shorting can burden them with unbearable losses. On the other hand, if you play wise with your options, you can benefit even when the prices of a stock go down. The put option allows you to benefit from decreasing value of a stock by giving you the right to sell your stocks at the set price, not the new (lowered) price.

The biggest advantage of disadvantage of options trading is the expiration date. When you own shares of a particular stock, you don’t have to worry about a deadline because there is none. On the other hand, an option will always have a deadline within which you can make a profit from your trade.

An important point to note when trading options is that the contract gives you a right, not the “obligation” to sell or purchase the stock. You are not obligated to take an action i.e. buy or sell, the stock before or on the set date at the time of entering the contract. However, not exercising your right within the set date can end up as a worthless expiry, which means you will lose all that you have invested in buying the options.