If the asset moves 3% your investment can move 6-7% depending on the spreads. On margin, your risk is amplified by your… margin (This involves any method of trading with pseudo borrowed money, including CFDs) 2 x Leverage you can loose 2x underlying asset. No one but sizeable institution grade investors will be even using this approach. Options effectively allow you to hedge your trades and reduce your principle sizeĪlthough “hedging your trades” being one possible usage of options, this is the least effective way of defining them.
