What risks should I be aware of when trading stock options?

Options trading can be risky, with potential losses that may exceed your initial investment. Here are some key risks to consider:
1. Leverage Risk: Options can control larger positions with less capital, which can amplify both gains and losses.
2. Time Decay: As options approach their expiration date, their time value decreases. If the underlying asset doesn’t move as expected, you could incur losses.
3. Market Volatility: Sudden market shifts can affect options pricing. While high volatility can increase potential returns, it can also lead to unpredictable losses.
4. Liquidity Risk: Some options may have low trading volumes, making it difficult to buy or sell at desired prices, potentially resulting in larger losses.
Understanding these risks and implementing effective risk management strategies is crucial for success in options trading. For more information, visit https://tradegenie.com/