Current Attitudes Toward Stock Options

Stock Options have a bad name. Many investors refuse to have anything to do with them, having heard that they are "speculative." For example, in some lawsuits, judges and jurors take it for granted that if a stockbroker or investment advisor engaged in stock option transactions for an investor, it was automatically a "speculative" investment.

In the following pages I hope to convince you that many stock option strategies are not speculative, and are less risky than the perchase and sale of stocks. The one difference is that stock option strategies are more difficult to understand, and it takes more time to learn the vocabulary. For this reason, part of this book deals with understanding the vocabulary of stock options.

But this is not really a book about options. It is a book about risks in the options market. There are already a number of books that explain options, generally in much more detail than options are routinely sent to investors who trade in options, contain a lot of valuable infomratoin on options and examples of various option strategies.

There are now several mutual funds that advertise that they buy and sell options to achieve a higher yield for their investors - and for some investors, letting the experts handle these kinds of trades is the best decisision.

As a result of this liturature, lots of people know and understand the basic principles of options.

Yet, in the 15 years that I have been involved in option trading, I have been amazed at the lack of general understanding of what is a "risky" strateg, and what is not, of what is "Speculative" and what is not. Many people - some of whom surely should know better - think that any option trade is inherently speculative. At the other extreme, I have known experienced brokers using risky strategies they sincerely believed (and told customers) could not lose money!

The truth lies somewhere in between. Some strategies are high risk, and some are low risk. Some are speculative and some are conservative. Some are appropriate for the particular investor, and many are inappropriate.

The purpose of this book is to try to define these terms, and to identify some of the more common strategies that fall into each group.

As a consequence, this book is not thorough in its discussions of the principles of options. it is written primarily for people who either know a little something or a lot about stocks, if not options.

Part one is a summary of option history, principles and risks. Part two is a compilation and discussion of basic option strategies. Parts three - five describe some of the more common complex option strategies including those that should be classified as "conservative." In each part I try to identify what the risk is, and why.

In this way, I hope to play a small part in clearing up the widespread misunderstanding of the relationship between risk and option trading.

To find out "How to Make Money with Stock Options", order today!