Naked options trading means selling options without owning the underlying asset or a corresponding option. The main risk is potentially unlimited losses. If the market moves against your position, you may have to buy or sell the asset at a much worse price, causi...
Blog by PriyaSahu
Concentrated stock positions mean holding a large part of your investment in just a few stocks. The risk is that if those stocks perform poorly, your entire portfolio suffers big losses. This lack of diversification increases the chance of losing money because yo...
Currency fluctuations risk means the value of your investment in international stocks can change because of changes in exchange rates. When you invest in foreign stocks, your returns depend not only on the stock performance but also on the currency rate between y...
Holding too many stocks in one sector or industry increases risk because if that sector faces problems, all your investments can lose value at the same time. This is called sector concentration risk. It means your portfolio is not well diversified, and ...
Investing in bonds carries several risks like the chance that the issuer may not pay interest or return the money on time. This is called credit risk. Bonds can also lose value if interest rates rise, known as interest rate risk. Other risks include inflation ris...
Credit risk funds have the risk that the companies or borrowers whose bonds they invest in may not repay the money or interest on time. This can lead to losses or lower returns for investors. These funds invest in bonds with lower credit ratings, which ...
Investing in emerging markets carries higher risks due to economic instability, political uncertainty, and weaker regulations compared to developed markets. These factors can cause sudden changes in stock prices and may affect your investment returns. ...
Investing in international stocks carries risks such as currency fluctuations, political instability, and different market regulations. These risks can cause your investment value to go up or down unexpectedly. While international stocks can give good...
Investing in mutual funds in India has some risks like market volatility, interest rate changes, fund manager decisions, and hidden charges. Though mutual funds are managed by experts, they are still linked to market ups and downs, and returns are not guara...
Penny stocks in India are very risky because they belong to very small companies with low share prices and low trading volumes. These stocks can be easily manipulated, are less regulated, and can be highly volatile. Many of them may not have strong bu...
Small-cap stocks are riskier than blue-chip stocks because they are more volatile, less stable, and can be highly affected by market conditions. Blue-chip stocks belong to large, well-established companies with steady perfo...
The risk of investing in small-cap stocks is that they are more volatile and uncertain compared to large companies. Small-cap stocks often have less stable earnings and can be affected by market changes more sharply. They may also have less liquidity, m...
The risk of investing in startup stocks is high because startups often face uncertain futures and many may fail. Startup stocks can be very volatile, meaning their prices can go up or down quickly. These companies may not have steady profits or proven business mo...
The risk of over-diversification in mutual funds is that your returns may become lower and your portfolio harder to manage. When you spread your money too thin across many investments, the benefits of diversification reduce. This means even if some investments do...
The risk profile of a vertical spread is limited and well-defined. This means you can know your maximum possible loss and gain before starting the trade. A vertical spread involves buying one option and selling another option of the same type (calls or ...
Risk tolerance means how much loss or ups and downs you can handle in your stock investments without panicking. It is important because it helps you choose the right type of stocks or mutual funds based on your comfort level. If your risk tolerance is low, safer ...
The risk-reward ratio in options trading helps you understand how much money you are risking to earn a certain reward. For example, if you risk ₹1000 to potentially earn ₹3000, your risk-reward ratio is 1:3. In options trading, this ratio depends on whether you'r...
The risk/reward ratio in futures and options trading shows how much risk you take to earn a certain reward. For example, a 1:2 ratio means you risk ₹1 to earn ₹2. This ratio helps traders decide if a trade is worth it. In futures, risk can be higher as both profi...
The risk/reward ratio of iron condors is generally low risk with limited reward. This strategy aims to earn a small fixed profit if the stock price stays between two set strike prices until expiry. However, the maximum loss is also limited if the stock ...
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