Friday, October 22, 2010

Investing in options with limited risk

One can allot around 10 percent of investment in options. For example, when purchasing stocks one can also purchase call options at the same time. This limits the risk and also increases the profits if the market moves in the expected direction.
For stocks for which one thinks that the rally is almost over, if there is considerable option volume open, then one can invest in options instead. One has to make sure to sell the options at a loss or profit well before the expiration date.
Options is a very good alternative investment in a limited time horizon.

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