Put and Call Options: How Do They Work? скачать в хорошем качестве

Put and Call Options: How Do They Work?

If you have questions, feel free to email me at Matt@TaylorRetirementServices.com or call me today at 1-800-482-4720. For more videos and educational content, subscribe to our YouTube Channel here:    / @taylorretirementservices   Like us on Facebook:   / taylor-retirement-services-inc-13882430287...   Visit us online at: https://TaylorRetirementServices.com Puts? Calls? How do they work? An option is an agreement between two parties, where one party pays some money, and the other party provides a guarantee. There are two basic types: the put option, and the call option. Call Options The call option is the right to buy something at a prearranged price. Imagine you’d like to buy real estate, but you’re not sure whether the zoning for the property will be appropriate for your vision. You don’t want to lose the opportunity to purchase the land, but you also don’t want to go through all the time and effort to figure out whether the zoning will work. In this situation, you would purchase a call option, paying a small amount of money today to lock in the pre-agreed price for the land. The call option can also be used in the stock market. You can use call options to build a portfolio in which you have growth potential but no loss potential. The call option allows you to lock in a lower price for stocks, which becomes basically a discount in the future when the stock value increases. The call option allows you to have a portfolio where the core of your investment is safe, but the interest is what is risked. Worst case scenario, your initial investment stays level; best case your interest could double, triple, or go up fivefold. There are three products that use call options: Equity Linked Notes, Stock Market Certificates of Deposit, and Equity Indexed Annuities. The risks in these products are only in how much the account will grow, not in how much the account can lose. Put Options The put option is the opposite of the call option. The put option is the “right to sell.” It’s also understood as insurance. Auto, health, and life insurance are forms of put options. You can insure your investments against losses with protective put options. For instance, when you own stock in the S & P 500, your investments can be at risk of the market declining rapidly, as it did in 2000, 2008, and most recently with COVID-19 in 2020. When you own these stocks, you earn dividends, which is like the interest that the stock produces. You can use your dividends to buy the protective put, which is basically buying the right to force someone else to pay you for those stocks in the future at today’s prices. This creates a safety net, where if the market drops below what your put option is, you will not lose less than your put option. The core of your account is still invested in the market, with unlimited upside potential. The put option allows you to use your dividends to create a counter-position to hedge you against loss. While not many advisors and clients use this particular strategy, our firm specializes in this protective put option. Protective puts offer a strong, useful investment technique, and you should demand it from your financial advising team. If you have questions, feel free to email me at Matt@TaylorRetirementServices.com or call me today at 1-800-482-4720.