Using options in your portfolio: Protect, grow, diversify
Some investors shy away from options. But used wisely, they have the power to protect, grow or even diversify your position. From Puts and Calls to more advanced Condor, Butterfly and Split Strike strategies, options can be investment heroes in disguise.
Because options can be used regardless of sharemarket conditions, they are popular with many investors.
What are options?Options sound complicated but they don’t have to be. Essentially, options are contracts between two parties, giving the buyer the right – but not an obligation – to buy or sell an underlying security at a predetermined price at a particular time in the future.
They allow you to ‘lock in’ a future buy or sell price for a share, allowing investors price certainty – the price you agree at the outset won’t change.
Options can help you to:
If you’re looking for more certainty in your portfolio, have you considered options? Hear more about options and why they could be investment heroes in disguise at our upcoming educational seminars. Alternatively, review our online options courses or continue to read about the benefits and risks of investing in options.
Options give you options
There are a number of ways to use options in your portfolio to protect, grow or diversify.
As with most investments, options carry both benefits and risks. Options trading can be an effective way of generating wealth, whether as part of a wider investment strategy or as a standalone technique. However, options do carry risks. In particular, when writing options you can open yourself up to the risk of potentially unlimited losses. Read more about the benefits and risks of investing in options.
With around 26 strategies, ranging from Puts and Calls to more advanced Condor, Butterfly and Split Strike, options can provide a level of certainty regardless of how the market performs.
• Bullish strategies: These work best in rising markets
• Neutral strategies: These work best in flat markets
• Bearish strategies: These work best in declining markets
Options can be used in all market environments. Learn more about these strategies.
You can write options over single shares, or over an index:
• Equity options: Equity options are issued over shares in individual companies allowing you to trade based on your view of that company’s likely share performance. ASX offers options over 71 individual shares traded on ASX.
• Index options: Index options give you exposure to a whole market index, such as the S&P/ASX 200. They offer similar benefits to options traded over shares in individual companies with the added benefit that they offer exposure to the broad range of securities that make up an index.
Read more about equity and index options, as well as a more specialised type of option called a low exercise price options
Where to next?
We have a range of educational material to help you be informed about options.
• Educational seminars: In June and July, ASX will host a series of educational seminars. Register your details today.
• Online course: Can’t make it to a seminar? We have a range of online options courses available, whether you’re starting out in options, or you’re a more confident investor.
• Keep informed via email: We can keep you posted via email when new educational material is available about options.
• Speak to a broker or adviser: To find out if options may be suitable for you, contact your broker or adviser: