Options Trading for the Conservative Investor: Increasing Profits without Increasing Your Risk
Options Trading for the Conservative Investor provides a lucid guide for how to approach options trading conservatively, yet also focuses on the fundamental need for good returns and provides real examples throughout.
Investors tend to be aware of the potential for high returns without also acknowledging that such strategies are usually accompanied by unavoidable high risks. This is where the inexperienced suffer losses in the market. The lack of experience that attracts the novice to speculation in options and other high-risk strategies has caused much grief in the market.
When we look back at the dotcom years, we see that many first-time investors made quick paper profits, only to lose it all in a sudden reversal of fortunes. But conservative investors know that putting all of their capital in a single industry is ill advised, especially if they select companies that have never reported a net profit or whose stock has risen over $200 per share in a few months or whose actual core business is only vaguely defined.
Given these observations, conservative investors naturally seek methods for using their capital that achieve some very specific goals, including the following:
- Preserving spending power after both inflation and taxes.
- Avoiding unacceptable market, liquidity, and diversification risks.
- Protecting profits without loss of invested positions.
This book does not suggest that you have to become an expert in a broad range of complex or exotic options strategies. Instead, it proposes a rather limited number of strategies appropriate for conservative investors.
Our purpose is to respect the risk limitations in the conservative strategy while showing how experienced stock market investors can expand their yield levels significantly, protect existing positions, and come through down cycles in the market intact.
- SETTING THE GROUND RULES
- OPTION BASICS
- OPTIONS IN CONTEXT
- MANAGING PROFITS AND LOSSES
- OPTIONS AS CASH GENERATORS
- ALTERNATIVES TO STOCK PURCHASE
- OPTION STRATEGIES IN DOWN MARKETS
- COMBINATION CONSERVATIVE TECHNIQUES
- STOCK SELECTION AND THE OPTION CONTRACT