Chapter 1

Options Trading and the Individual Investor

In This Chapter

arrow Getting to appreciate options

arrow Analyzing options with any market in mind

arrow Making the markets work for you

Whatever your level of experience, your general tendency to trade or hold positions for a long time, and your risk profile, as an individual investor you can add options on individual stocks, indexes, and exchange traded mutual funds (ETFs) to your investment war chest. You should do so with two goals in mind: risk management and growing your assets. And because there are so many ways to use options, just about anyone can use them — as long as you take the time to learn the associated risks and rewards and become familiar with the particular strategies that suit your purposes.

There is a difference between trading and investing, especially in terms of time frames. Investing is all about using the power of time and the benefits of compounding to build wealth over long periods. The traditional buy and hold strategy for stocks is a perfect example, as is the owning of rental properties for long periods to generate income.

Trading is by design a shorter-term proposition, where you may hold a position ...

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