Chapter 1 Calls and Puts: Defining the Field of Play

Nine-tenths of wisdom is being wise in time.

̶̶ Theodore Roosevelt, speech, June 14, 1917

Options are amazing tools that can help you expand your control over your portfolio, protect positions, reduce market risk, and enhance current income. Some strategies are very high risk, while others are extremely conservative. This is what makes the options market so interesting. The variety of creative uses of options makes it possible to lock in profits in the most uncertain of conditions, to pursue income opportunities, or to hedge risk, without being exposed to volatile markets.

Because the option is an intangible device, its cost—known as the premium—is only a fraction of the stock price. This makes ...

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