- Options allow for outsized returns, but unlike most stocks, they can also lead to unlimited losses or a total loss of the investment in the best case negative scenario.
- However, returns of 1,000% aren’t rare and options are a great way to increase your income or protect your returns.
- As options have an expiration date and some carry unlimited risks, you should really only use them if you know what you are doing.
An Investiv Daily subscriber recently asked me what I think about options as I never write about them.
Options have become very attractive in this environment of low dividend yields and high price to earnings (P/E) ratios, especially for those who want to achieve extra income by writing options (writing an option involves opening an option position with the sale of a contract where the buyer gets the right to buy or sell a certain stock at a certain price for a period of time while the seller gets the option premium).
Today we’ll discuss options, different types of options, how can they be used, and when and who should use them. More →