Getting Started in Options
Chapter One
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, but others are extremely
conservative. This is what makes the options market so interesting. The variety
of creative uses of options makes it possible to tie in profits in the most uncertain
of conditions, or to pursue income opportunities without
being exposed to even the most volatile markets.
Because the option is an intangible device, its cost
is only a fraction of stock prices. This makes it possible to
control shares of stock without assuming the market risks.
Each option controls 100 shares, so for approximately 10
percent of the cost of buying shares in a company, you can
use options to create the same profit stream. This makes
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