Trade Options: Now Is The Time

Are you an investor who has not yet learned about the risk-reducing properties of options and how adopting conservative strategies can preserve the value of your portfolio?  If not, that's a shame because if you had been using a very conservative option strategy – collars – to protect the value of your portfolio, you would have been able to escape relatively unharmed from the gut-wrenching (for most) stock market debacle of 2008.

Are you someone who believes in buy and hold investing, despite all the bad press that strategy has received?  You can write covered calls to increase your chances of earning a profit when owning stocks  - and at the same time benefit from a minor insurance policy that protects you from losing money – but only if the stock declines by a small amount.  You collect a cash premium that's your to keep when selling those calls.

This is an ideal strategy for learning how options work.

Are you an investor searching for stocks to buy at good prices?  There's an options strategy tailor made for you.  Select your stock, decide the price you want to pay, and you can sell a put option.  You collect a cash premium that's your forever.  The good news is that there are only two possibilities for this trade: You may buy your stock at your price (and you keep that cash premium), but if you don't buy the stock, you keep the cash as a consolation prize.

When you sell a put option, you give someone else the right to force you to buy 100 shares of stock at a pre-determined price.  The idea is that you will not sell the put unless that price is to your liking and you'd be willing to buy shares.

These three trading ideas are easy to learn for most investors.  If any of them sound appealing, you can learn much more about them at this blog, or by visiting the CBOE learning center, the Options Industry Council, or by ordering The Rookie's Guide to Options (e-book sampler available at no cost.)

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One Response to Trade Options: Now Is The Time

  1. Gil 04/22/2009 at 7:59 PM #

    For slight bullish or slight bearish “rookies”, simple spreads might be usefult too
    Gil