Options Strategies

Effective risk minimization tools.

Options are instruments that give a buyer the right, but not the obligation, to buy or sell a security at a specific price known as the exercise or strike price before a specified date. They are categorized as derivative instruments because their value is derived from the value of an underlying interest, such as a stock, bond, or other financial instrument. In the case of options, the option buyer pays a premium to the seller of the option.

Options strategies are used by institutions primarily as a way to manage the various risks associated with holding financial assets.

If it is true that options are used as risk minimization strategies, then why are they received with such negativity by investors? The answer reveals the major misconception about options, and derivatives in general. Derivatives facilitate the use of leverage. However, it is important to note that it is not the use of derivatives themselves that is risky, but rather the misuse of leverage that the instruments afford.

The Burak Hannon Brojde Group can help devise conservative option strategies that can help protect your portfolio from market downturns, add income to portfolios to enhance yields, and help play corporate earnings with less risk than owning or shorting the securities outright.