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•Hedge shares or a portfolio of shares
•Increase yield on a portfolio
•Utilise leverage safely (and avoid potentially destructive margin calls)
•Build advanced strategies for the more sophisticated trader
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Exchange Traded Options (ETOs) exist as either Call Options or Put Options.Â
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•A call option gives the call buyer the right (without obligation) to buy the underlying stock at an agreed price (the strike price) up until a particular date (the expiry date).
•A put option gives the put buyer the right (without obligation) to sell the underlying stock at an agreed price (the strike price) up until a particular date (the expiry date).
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Put options are widely used as an insurance instrument. Purchase of this “insurance”, for a premium, guarantees that no matter what happens to the share price prior to the expiry date, a client is assured of being able to sell at the “strike” price. In other words, even during times of severe market turmoil, purchasing a put option can substantially protect a client’s equity holdings.Â
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Put options can also be used to speculate on a decline in a particular share’s price, or the share market as a whole.
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On the other hand, those wishing to take advantage of possible share price appreciation can do so by purchasing call options. For only a fraction of the share price a larger position can be built with a pre-determined risk limit.
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Call options can also be sold against existing shares. Investors can generate substantial monthly returns by receiving premium for sold calls.
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Options allow a myriad of investment and trading strategies to protect investors’ wealth, increase returns and speculate on markets. Our advisors are experienced at trading in various derivative markets and are able to formulate investment and trading strategies appropriate to market conditions.
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