What Are Options and How Do They Work? - Transcript

Options are contracts between two investors they are agreeing to buy or sell a position in a stock based on a price in the future they have a time period they expire at some point um many people believe that covered call writing is a safe investment strategy and they do it to collect premiums some people put puts and calls around the concentrated position to make sure that there’s not a huge movement that they cannot tolerate around that position but they are essentially betting on which direction the stock market is going they are not necessarily stay safe not even covered calls are necessarily safe because you could have a long-standing position that has taxes associated with gains over periods of years and you could lose that position in a covered call strategy you could lose the right to hold it or you have to go back in and buy more and if you don’t have the capital to to buy additional shares you know you’re going to lose your stock so there’s a lot of embedded risk in options transactions.