Mention that you trade options at a party and you are likely to hear something like “Wow, that’s gutsy.” That’s because investors have heard stories about people losing their shirts trading options or they’ve heard statements to the effect that 75% of options expire worthless. But the fact is, there are many ways to use options, and investing with options can actually be less risky than investing in stocks. Let’s start with the basics. What is an option? There are two kinds of options: puts and calls. A put allows the buyer to sell the underlying stock at a...
