Many stock traders and investors avoid options because they seem too complex or risky. Although it is very easy to lose large amounts of money in a very short time misusing options, investors and traders of all kinds should at least consider them as one of many tools to exploit market opportunities. Here's a primer on using options, with common terms and applications of options strategies.
Although a thorough discussion
of options is impossible in the
space of a single article, it is
important to introduce a few
basics. There are, if nothing else,
two outstanding but little-used
options strategies for the markets
that should be discussed —
buying deep-in-the-money call
options as a proxy for purchasing the stock and selling
options against that position to create a high-probability,
high-return alternative to conventional covered-callƯ writ-ing.
The paradox of these strategies is that despite their
reputation as being risky, they can be less risky than buying
the underlying while offering all, if not more, of the potential