Volatile markets – what are your options?

Find out how to minimise risk with options.

Exchange Traded Options (ETOs) are often referred to as risky derivatives and overlooked by retail investors. However, ETOs give you the opportunity to profit from market movements for a fraction of the cost of holding shares directly. In the current volatile market, it pays to find out more about option strategies that help reduce risk and improve returns.

One of the most popular strategies is protecting your shares:

When there is uncertainty in the marketplace, buying a ‘put option’ can act as insurance against your existing stock position. By paying a put premium you can be confident that no matter how far the stock price falls, a guaranteed selling price exists for the life of the option. You can profit from this position if your underlying stock drops in value and you exercise the option to offset this decline.

Under this strategy, losses are limited given if the share price rises, your gain is reduced only by the premium paid.

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