In this article, we will discover the alternative to investing in options on Plus500 with CFDs.
Options are a particular category of financial assets made available for online trading: Plus500 or one of the most used platforms as well as on the European continent and in over 100 countries worldwide, offers its users the opportunity to get familiar with trading operations using a free demo account.
On our website you can also read a complete Plus500 tutorial.
To understand well how to make a profit on options using the Plus500 platform, it is essential first to understand what it is about. Options are an asset class that has reached wide popularity in recent years thanks to their ability to generate profits even in unstable market conditions.
The ease of use of Plus500 combined with its ability to trade in demo mode without any initial deposit is essential to fully understand the potential of the options and their versatility in the world of online trading.
Options are to all intents and purposes a right, but not an obligation, to buy or sell a certain financial asset at a given price level.
Options available on Plus500
On Plus500 there are option CFDs on some of the most important stock indices as well as on important listed stocks including Facebook, Google (Alphabet), Deutsche Bank and Apple.
The full list is available in the options section of Plus500's website.
How to Trade Options on Plus500
One of the strengths of Plus500, which has helped this platform achieve wide popularity among the public, is its ease of use.
Not only are the controls intuitive, but the site’s graphical interface is functional to understanding thanks to a perfect organization of spaces and linear graphics.
First-time online traders will find it easy to trade in a complete environment while experienced traders will have the full range of functions and assets at their disposal to invest and make a profit.
To do options trading, the steps to follow are very simple:
- on the left of the screen click the “Trade” command
- scroll down through the different categories available until you find Options
- Once you have identified the reference set (ranging from options on stock indices to the most important stocks, such as Facebook, or Deutsche Bank, for example), click to open the list of options available.
At this point, in the main part in the middle of the screen, the trader has at his disposal the full range of options on which he can trade.
The last step is to choose between a Call or a Put option, depending on the market trend and your preference for investing in options on Plus500.
What does it mean to buy an option on Plus500?
Plus500 is an online trading platform active in CFDs so trades involve the purchase of CFD contracts linked to the reference assets, which, in this case, an option, namely the ability to exercise the right to complete a purchase or sale at a certain level of the quote.
When you buy an option on Plus500, you negotiate the opening of a Long position on the CFD on the linked option, i.e. you predict an increase in the value of the underlying financial instrument.
This means that the gains of the online trader when opening a Long position on an option, or Buy, are obtained in the event that the price of the option increases: the profit will then be calculated in proportion to the increase in value.
What does it mean to sell options on Plus500?
When you sell an option on Plus500, therefore, you are trading the opening of a Short CFD position on the linked option, i.e. you are predicting a decrease in the value of the underlying financial instrument.
This means that the trader’s gains when opening a Short position on an option, or Sell, are obtained in the event that the option price decreases: the profit will then be calculated in proportion to the decrease in value.
How to finalize an options transaction on Plus500
Once you have studied the reference market and chosen the option on which to trade, all you have to do is open a position.
In this case, the screen that will be presented to the user will be similar to the following one and will include all the details related to the position.
This, in short, is the key to understanding the meaning of each individual item:
- Contracts: indicates the number of CFD contracts of the investment
- Use leverage: leverage is one of the biggest benefits of CFD trading. Thanks to its operation, the trader is required to pay less than the total investment: the capital invested is multiplied by the ratio expressed by the leverage.
- Margin required: is the total required to the trader to make the investment, after the application of leverage.
- Stop Limit: provides the automatic closure of the position when a given level of profit is reached.
- Stop Loss: on the other hand, the trader is guaranteed by the risk of excessive losses: when the position reaches a maximum level of losses, it is automatically closed by the platform.
- Guaranteed Close: At the cost of an additional spread, the guaranteed close involves closing the position in the event of high price fluctuations. Not all instruments provide this option, which is a guarantee against market instability and volatility.
- Buy/Sell: with this command, the trader opens the position in real time, in the set mode.
Concluding an operation: closing the position
Simply and intuitively, to close the position manually, once you have reached the desired result or in any other case, simply order the system to “Close position” through the specific button “Close position” relative to the open position.
Remember the basic principle of CFD trading: a position opens both in Buy and Sell mode, and closes only with the command “Close Position”. This means that to close a position you do not need to ask for an opposite transaction (Sell to Buy, and vice versa), as this would result in the opening of an additional position.
To learn more about how to invest in options on Plus500, you will find an exclusive definitive guide to CFD trading at your disposal.