The Roundup: Options Essentials
It seems like spring has finally sprung! The weather in the DC metro area has been lovely this weekend - perfect for grilling and eating outdoors! I've been trying to lay low for the better part of this week because I've been running on fewer hours of sleep than normal. Last night I went to see Don't Block the Box's comedic line-up at the Wonderland Ballroom. All five performers (and the show's host) were female - so cool! Tonight my friends and I will be venturing to Foggy Bottom to Soi 38 - their kanom jeen sounds amazing :)
It's hard to squeeze all of this financial literacy in to my schedule nowadays, but our salsa schedule has tapered down and my weekdays will be a little more free in the next month. I'll continue trying my best to keep these posts regular :) check out what I learned about options as an investment strategy below!
Portfolio Management: Options Essentials
Options Trading
Invest in performance of security (stock or ETF) with lower initial investment
When you buy an option contract, you purchase a contrast that you gives you the right to buy or sell a security at a certain price before a certain date
Call option: good to own if price of stock goes up
Put option: good to own if price of stock goes down
Options premium: determined by stock price, volatility, time decay
Use of Options
Speculation: profit from security price movement for small initial investment
Income: continually selling options in sideways markets
Protection: investors can use put contrast to act as insurance for a particular stock
Position-Sizing
Minimizes risk of leverage with options
How many contracts should I buy or sell?
Consider the risk and reward profiles unique to different options strategies
Long calls and long puts: unlimited potential reward, but investor can lose premium
Covered calls: owning 100 shares of a security and simultaneously selling a call option (to generate income); limited potential reward and investor can suffer a deficit if security's price goes to $0 value
A former coworker of mine is also hosting a birthday party this weekend for her daughter and her boyfriend's daughter. She told me that there will be a moon bounce and that I should bring my "inner kid"! The next few weeks will mostly involve me apartment-hunting in Cleveland, preparing for my parents' wedding reception, and getting ready for our trip to Greece!
