Options to Leverage and Manage Your Portfolio
Both of these assumptions can be challenged and the stock market universe expanded by also taking a look at the option as an alternative. This may work purely for speculation or as a highly conservative strategy, and can even be used to protect your portfolio from loss.
The advantage in using options is that they can be designed to suit any risk level and any market strategy.
The two beginning assumptions about entering the market can be expanded to the point of view that there is much more than simply buying and selling stock, and options open up a world of new possibilities. Options also provide a means for going short without the high risks of selling stock short. In a short position, the sequence of trades is sell-hold-buy (or with options, it is also possible to have the sequence sell-hold-expire). Using options is not always a high-risk approach; it can be designed to be exceptionally conservative.
Options are quite fl exible so they can be designed to suit any situation and any risk tolerance level.
By Michael C. Thomsett