The purpose of Shares

Purpose: Speculation: Responding to expected price movements. Hedging: Protecting an existing investment against unfavorable price fluctuations. Costs: As a buyer you pay a premium for the right contained in the option. If you do not exercise the option, it may expire worthless. Writing: You can also sell options (writing). You will then receive the premium, but may have an obligation to deliver (with a call) or buy (with a put) the underlying asset. This entails additional risks.