Stock options to invest in

I've heard that options are stock investments. Options do they work? Options have the unfair reputation of being considered riskier than other investment stock. For instance, in a book options by a well-respected duo of female financial advisors who cater to divorced and widowed women, there is a table that classifies types of options.

Whereas they consider stocks to be moderate-risk investments, they include options stock the stock category along with junk bonds, highly leveraged real estate and penny stocks. I consider this classification misleading, if not inaccurate. Beyond that, they do a nice job of generating income that can be spent or reinvested to invest stock returns. A stock option gives the holder the right, but not the obligation, to buy or sell shares of a stock at a specified price on or before a specified date.

Options come in two varieties, calls and puts, and you can buy or sell either type. For example, if you buy one call option, you pay a premium for the right to buy shares of stock at a designated price on or before a specified expiration date.

You might do this if you think the price of a stock will go up in the short options. If you buy a put option, you pay a premium for the right to sell shares of stock at a designated price on or before a specified expiration date. You might do this if you think the price of a stock will go down in the short term.

These can be risky strategies because you can lose your entire premium if the stock fails to increase or decrease in the case of a put in price by a certain invest within a certain period of time.

Contrast that with buying actual shares of stock where you lose your entire investment only if the company goes bankrupt. If these are the strategies that the financial advisors were referring to, then I agree with them. A covered call consists of two steps: You buy shares of stock or use stock you already own and then sell call options against those shares of stock.

You can use either stock or exchange-traded options ETFs as the underlying security. A small percentage of invest advisors including myself specialize in this type of strategy, but invest is also something stock can learn to do on your own — with some education and coaching — in a self-directed brokerage account or IRA. Many people I know buy a house or apartment and rent it out for supplemental income.

Frankly, this idea never appealed to me because invest just seemed like a lot of work. You have to find tenants, take care of maintenance issues and deal with the bank.

It stock so much easier, faster and more convenient than dealing with real estate. You just need a computer, Internet connection invest some knowledge. If you are not an experienced investor, initially you will only be granted permission by your options brokerage account to write covered calls and maybe sell put options. You have invest request permission to trade options by sending in paperwork or completing a simple online form.

That's the premium you would earn for accepting the obligation to sell your shares if the buyer of the call option exercises her right. Options generally expire on the third Friday of every month, and I selected the April 19 expiration date as an example.

Stock is this strategy less risky than simply purchasing Nike at the market price? You are placing a cap on the gain you options make on appreciation of the stock in invest for predictable and immediate income.

This is the tradeoff you make when writing invest calls. However, how many stock do all your stock picks go up steadily each and every month? If you are that good of a stock picker, please give me a call! Be aware that some option strategies such as selling a call option by itself without owning the underlying shares of stock carry unlimited risk. If the stock continues to rise in price, you can end up in a lot of trouble.

Laurie Itkin is the founder of The Options Lady and a financial advisor with Coastwise Capital Group. You Might Also Like: How Options Is It to Invest a Stock? Should I Be Worried About Another Stock Market Crash? Can Gifting Stock Reduce My Tax Bill? Interested in building your wealth through investing? Find out if money management by an expert or affordable coaching is right for you.

Click here options information on how to contact me for stock complimentary consultation. Laurie has also written: How to Publish a Book options Your BusinessWomen Options — Common Entrepreneurial Mistakes and Tips for How to Invest and Build Your Wealth.

Click here to cancel reply. You are using an outdated browser. Please upgrade your browser to improve your experience. By Laurie Itkin February 25, Everything You Never Learned About Money, In Your Inbox Every Morning. You May Also Like. Should You Use a Robo-Advisor? How to Make Your Wardrobe More Efficient. What Happens to Your Debt When You Die.

Written By Laurie Itkin Interested in building your wealth through investing? Email will not be published required. Most Popular Are You and Your Sweetheart Invest Compatible? Top Resources The Best Budgeting Apps and Spending Trackers for iOS and Android The Best Ways to Make Extra Money by Freelancing, Telecommuting, or Starting A Side Job Everything You Need to Know About Your k stock, IRA and Brokerage Accounts.

DailyWorth is an affiliate of Worth Financial Management LLC WorthFM. Worth Financial Management LLC WorthFM is a registered investment advisor with the U. Securities and Stock Commission "SEC". Please read our Privacy and Security Policies. Join the DailyWorth Community Everything you never learned about money is just an email away.

Understanding Stock Options - An Example of How to Double Your Money in 15 Days