Exploring Options
Exploring the World of Options
Financial investing often conjures up images of ocean-front mansions, yachts, private jets, and more recently, CEOs serving extended jail sentences.
But finance isn’t limited to the rich and famous – jailbirds or not. It is for everyone sending kids to college, preparing for retirement, trying to outpace inflation, or just supplementing income.
This course will greatly change the way you see investing. Risks you now fear will vanish. Opportunities will appear that you never dreamed of. After completing it, you’ll discover ways you never thought possible to control the risks and rewards associated with buying shares of stock.
If you’ve ever lost a significant amount of money from holding shares of stock, you can prevent that from happening again. If you’ve ever turned down a stock purchase because it was too expensive, you’ll now be able to afford it. If you wish to make money in the stock market whether a stock rises or falls, we’ll show you that as well. Would you like to protect capital gains without selling your shares? That’s easy to do.
Creating monthly income, increasing cash efficiency, diversifying, and hedging can also be added to the list. Most of all, you’ll never have sleepless nights again worrying about how the erratic behavior of the stock market will affect your portfolio.
But wait a minute. Isn’t this course about options? Aren’t they incredibly risky? How can risky options decrease risks in the stock market?
If you’re new to options, you’ve probably heard that options are risky and more comparable to casinos or the dog tracks. That risky reputation is really a misperception mostly due to the financial media that, of course, only reports when things go wrong. The truth is that options by themselves are not risky but they can be used in risky ways.
To classify an option as risky is like saying a wrench is dangerous. To Bruno the mechanic, it is an invaluable tool. But in Parker Brothers game of Clue®, a wrench in the hands of Professor Plum or Miss Scarlet can be a formidable weapon. The same tool that brings your car to life can also leave you dead in the library. It all depends on how it is used.
Options are just one of many assets available to you in the financial markets. But you can think of them as tools that allow you to custom tailor risks and rewards. Depending on the risks you choose to accept or avoid, options can be used in a myriad of ways ranging from ultra conservative to recklessly aggressive.
For example, at one extreme, we can use options to create portfolios that have zero risk. That’s right – none! That is, we can build a stock portfolio that is guaranteed to increase to a certain value at a future date and therefore behave like a Treasury bill.
At the other end of the spectrum, we can create portfolios with so much leverage that a small percentage change in a stock’s price could bankrupt a large financial institution. This is, in fact, what happened in 1995 when Nick Leeson destroyed the historic Baring's Bank by recklessly gambling in the futures market in an attempt to support some options positions that had already gone bad.
If the leverage is great enough, even well capitalized banks cannot withstand the pressures. (For a firsthand account of how Mr. Leeson created one of the greatest financial disasters in history, check out the movie Rogue Trader. It’s a great lesson in what can happen if options are used in the wrong way.)
As you might have guessed, any shade of risk between these two extremes is possible too. It all depends on what you’re trying to accomplish and the risks you are willing to take to reach your goals. Naturally, only the devastating stories are reported by the financial press and that’s why options have earned such a risky reputation. After taking this course, you’ll see there’s another side to the story.
So how can you explore the world of options and find out how your style of investing or trading can benefit from their use? That’s exactly what this course is designed to do. It was developed to provide you with all the necessary information so that you can understand why options are more popular than ever. They allow you to create new opportunities and, more importantly, hedge the day-to-day risks of the stock market.
Whether you wish to speculate for an ocean-front mansion or just safely supplement retirement income, avoiding risk is almost as good as avoiding jail.
