Home > Platinum Bullion Guide > Platinum Investing

Platinum Options

The buyer of a platinum option contract is conferred the right (but not the obligation) to buy or sell a specific amount of platinum at a fixed price (strike price) to be delivered on a designated date. This right can be exercised anytime before the option expires but the option buyer can opt not to exercise the option should the price of platinum move against him.

The advantage of buying platinum options is similar to that of platinum futures in that they both provide significant financial leverage. However, unlike a platinum futures contract, the platinum options contract holder do not have the obligation to buy or sell the underlying platinum. Hence, the platinum option buyer's downside risk is strictly limited to the cost of the option - i.e. the premium plus any transaction costs.

The disadvantage of platinum options is that they can expire worthless if price of platinum does not appreciate beyond the strike price within the lifetime of the option.

Another useful aspect of investing in platinum options is that, unlike more traditional platinum investments such as platinum coins or platinum stocks which only gain in value when the price of platinum goes up, it is possible to profit from a drop in platinum price when trading platinum options. One can purchase platinum put options, which gain in value as platinum price falls. Buying platinum put options allow the astute platinum investor to bet against platinum price. An investor with a sizable stash of platinum bars or platinum coins can also protect the value of his holdings against falling platinum price by purchasing some platinum put options.

For the novice investor, options trading can be a rather complicated subject. You can learn more about trading platinum option contracts at The Options Guide.

How to Start Trading Platinum Options

To buy or sell platinum options, you need to open a trading account with a broker that handles platinum futures options trades. Most online brokerages out there only deal with stocks and stock options. Only a few such as TD Ameritrade lets you trade futures and futures options as well. TD Ameritrade also provide a virtual trading platform where beginners can try out futures and options trading in real market conditions without using real money.