Using Options to Provide Financial Flexibility

Options provide a flexible investment tool. The advantages and enhancements of options trading are many. Options are available for many types of underlying assets such as stocks, futures, indexes, as well as other markets such as currencies. At any given time, you are able to buy or sell options with a wide selection of strike prices (the price contracted for the underlying asset), and various contract expiration periods. This wide selection also provides you with a wide range of prices that you can buy or sell an options contract.

Because of their unique risk/reward structure, options can be used in many different combinations-with other options or with the underlying asset. You can build options positions to hedge a current position, or speculate without a major investment on your part. For more information, see About a Hedge Ratio. You can use options to protect your holdings from a market decline, or increase your holdings. Options enable you to position yourself for a market move, or benefit from an increase or decrease in price without actually buying the stock or futures contract, which means less of a financial risk to you. Options trading can even provide profits in stagnant or declining markets.