subject: Using Options as a Strategic Investment [print this page] If you have stumbled onto this page then you are actually looking for ways in using options as a strategic investment of your money. Well, options are definitely one of the most flexible financial instruments that are very much available in todays community in terms of general investment. How to properly use these options as your strategic investment can really maximize fully your returns portfolio and surely minimize the downside risk. Following below are for steps on how to use options as your strategic investment. These can be very helpful to you, in order to protect and make profit in your investments. First is to put options to be able to protect a capital. If you own a certain capital or huge capital in the market today, you must be concerned about its potential bearish movement. Thus, one of the basic ways to make use of options as your strategic investment in this situation is to simply buy a put option. You may be aware already that put options can definitely increase in its value as the security declines of drops in price. So, therefore, purchasing a put option is simply the way of safeguarding your exposure to the market volatility as well as partially making your position insured against a downside movement. Another way to use options as a strategic investment is by locking in profits by using an option collar. This is very applicable if you have experienced a certain favorable move in the optional security, yet disinclined to close such position and take the profits. The option collar composed of purchasing a downside or failed put option and then financing it by putting a sale of call option. In this way, the possibility of covering the put option cost (the price you have purchased) can be completely covered. However, you must keep in mind that protecting your profits from possible downside move can also limit the upside possibility of profiting more. One of the most popular in these methods of using options as your strategic investment is putting up a sale of covered calls against the positions that you have already succeeded. As simply the seller of a call option, you are definitely paid a premium to be able to undertake the responsibility of possibly delivering your stock or the ETF to the buyer of your call at the pre-determined price (strike). By using this method, you can use the premium that you have collected to minimize the basic cost. Last but not the least is the option of credit spreads. This is slightly a more advanced method in using options as a strategic investment. In this way, investors are allowed to generate a cash flow but without actually having their owned stock or such underlying security. The option of credit spreads usually come in two ways: the bull put credit spreads and the bear call credit spreads. The first one is used to be able to capitalize on the bullish trends with the use of the put options while the latter one is used to be able to capitalize on the bearish trends with the use of the call options.
Using Options as a Strategic Investment
By: anthony palmer
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