Comments on: Options Investing http://blog.cakefinancial.com/2008/10/27/options-investing/ Cake Financial helps you increase your ability to grow your retirement funds. Join Cake Financial today for Free! http://www.cakefinancial.com Fri, 12 Mar 2010 17:07:17 +0000 http://wordpress.org/?v=2.6 By: Mad Marv http://blog.cakefinancial.com/2008/10/27/options-investing/#comment-79 Mad Marv Tue, 28 Oct 2008 06:52:14 +0000 http://blog.cakefinancial.com/?p=180#comment-79 It's a 2 minute introduction to options, it's not meant to go beyond the simple definition. The only thing I think they should have added is to mention the difference between buying and writing options. It’s a 2 minute introduction to options, it’s not meant to go beyond the simple definition.

The only thing I think they should have added is to mention the difference between buying and writing options.

]]> By: David R. Strachan http://blog.cakefinancial.com/2008/10/27/options-investing/#comment-77 David R. Strachan Tue, 28 Oct 2008 02:07:08 +0000 http://blog.cakefinancial.com/?p=180#comment-77 I like Cake a lot, but this particular post is really an unfortunate oversimplification. Yes, buying a put can protect your investment, but most cases are not a matter of the stock crashing or doubling. In addition, there is no mention of the fact that options have an expiration. The reality is, there are risks with options just as there are with stocks. MORE than two things can happen. What if the stock only declines slightly in value? The investor then loses the premium on the option AND incurs the decline in value of the stock. What if the stock goes sideways? Again, out $1000. You might also explore selling covered calls as an additional strategy. At least with covered calls the stockholder keeps the premium if the stock declines, goes sideways, or stays below the strike price. Personally, I'd rather miss out on the upside than be slammed by a 10% premium. I like Cake a lot, but this particular post is really an unfortunate oversimplification.

Yes, buying a put can protect your investment, but most cases are not a matter of the stock crashing or doubling. In addition, there is no mention of the fact that options have an expiration. The reality is, there are risks with options just as there are with stocks. MORE than two things can happen.

What if the stock only declines slightly in value? The investor then loses the premium on the option AND incurs the decline in value of the stock. What if the stock goes sideways? Again, out $1000.

You might also explore selling covered calls as an additional strategy. At least with covered calls the stockholder keeps the premium if the stock declines, goes sideways, or stays below the strike price. Personally, I’d rather miss out on the upside than be slammed by a 10% premium.

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