As technological improvements continue to spread the speed and geography at which market participants access capital markets, traditionsl options are steadily gaining in popularity and trading volumes according to the Options Clearing Corporation.
As Option contracts, (Put and Call) become more mainstream there are opportunities, if used correctly, to dramatically reduce investor’s risk.
Here are a few useful techniques and ideas:
- Investors with concentrated positions – Traditions option contracts are especially useful in containing the wild movement associated with a single stock position (insiders, be sure to check your rules before commencing hedging techniques.)
- Portfolio Macro Hedging Insurance – Given the girth of various index options available, large portfolio insurance and hedging programs are a useful tool in many situations.
- Income Enhancement – It is possible to enhance income, over and above dividends, under certain appropriate circumstances, utilizing options.
- Capital Preservation – Certain situations may find it useful to utilize the minimum capital needed from an option contract to control an equity position.
If used inappropriately, like most investments, options can be dangerous to your health, however, if used correctly, they are not just for speculating any more, and can be a positive investment tool.
Have a Super, terrific Wednesday !