What is the primary purpose of option trading?

The primary purpose of option trading is to exchange options to buy and sell stock. Options give traders the right, but not the obligation, to purchase (call option) or sell (put option) a stock at a predetermined price within a specified timeframe. This trading mechanism allows investors to speculate on price movements, hedge against potential losses in their investment portfolios, or leverage positions to maximize returns.

While investing in bonds, trading commodities, or facilitating real estate transactions are all valid financial activities, they do not encompass the core function of options trading, which is inherently focused on stocks and derivatives related to stock movements. Understanding this distinction is crucial as it highlights the unique characteristics and strategies involved in options trading compared to other investment avenues.