An options trader is a financial professional who works with the stock market. They work with clients and help them to invest in different stock options, which are contracts that give an owner of the stock the right to buy or sell the stock at a fixed price for a certain period of time. Options traders may work exclusively for themselves or a company.
Options traders must be extremely knowledgeable and skillful when it comes to the options market. Trading in options is often a lot riskier than trading in stocks, as options have a greater potential for large losses than traditional stocks do. This means an options trader must be savvy on the options market and be able to perform market forecasting that can help limit a client's risks and maximize their profits.
Options traders come in four different categories. Retail investors are options traders who buy and sell options with their own money for profit. Industrial traders are options traders who perform the job for large financial entities like mutual funds and hedge funds.
Broker-dealers facilitate option trades on behalf of a company and its client base. Market makers are required to make bids and offers on the options traded on specific securities; therefore, market makers provide liquidity in the options marketplace.
Though it is possible to be a self-taught options trader, many who work for large financial firms possess either a bachelor's degree or master's degree in finance, economics, business, or another related field. Many also have to pass complex financial exams to gain certifications in the field. Examples of these exams include the Securities Industries Essential exam, and the Series 6 and Series 7 exams.