Why Options?

Why should someone who invests or speculates in the market learn to use options? The simple answer is that options can greatly enhance your profit from stocks and/or provide the means to protect your portfolio. The goal of this chapter is to familiarize the beginner with call and put options, and demonstrate some of the basic ways that options are used.

Suppose you buy a stock for $30 a share and it goes to $33. The stock price has risen by 10 percent and accordingly you have a 10 percent profit. That’s nice! If instead of buying the stock, you buy an appropriate option, you might make a 100 percent profit or even more for the same 10 percent rise in the stock price. That’s better than nice. That’s fantastic!

Of course, there are ...

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