What are stock options

You buy or trade stocks, bonds and mutual funds. Some investors use options on stocks or cash indexes to protect and insure the value of their portfolios. A major advantage of options is their flexibility.  You can protect stock holdings from a decline in market price  You can increase income against current stock holding  You can prepare to buy a stock at a lower price  You can position yourself for a big market move even …

…current market price, or, in the case of writing options, to earn premium income. Options involve risk and are not for the lesser risk taker. An investor who desires to utilize options should have well-defined investment objectives suited to his particular financial situation and a plan for achieving these objectives. The successful use of options requires a willingness to learn what they are, how they work, and what risks are associated with particular options strategies.