Options Strategies 101

Mike Buckius of Gateway Investment Advisers discusses the basics of options-based investment strategies

  • Cash-secured put writing and covered call writing are two examples of options-based investment strategies
  • Cash-secured put writing and covered call writing have the potential to offer similar levels of performance in a portfolio
  • When considering options strategies, investors should consider both the potential rewards and the potential risks
Options carry a high level of risk and are not suitable for all investors

All investing involves risk, including the risk of loss. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment, or investment strategy, prior to investing.

Call options can reduce the risk of owning stocks, but can limit returns in a rising market. The fund's use of options in managing volatility or in the pursuit of investment returns may not be achieved.

Put options: The buyer of a put option has the right to sell an asset at an agreed-upon price (“strike price”) within or at a specified time. The seller of the option has the corresponding obligation to buy the asset at the strike price if the buyer exercises the option within or at the specified time. The buyer of a put option risks losing the amount paid for the option if the price of the asset does not fall below the strike price. The seller of a put option risks losing the difference between the asset’s price and the option’s strike price, less the amount received from the sale of the put.

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