Zero is Your Hero

With the right Index Options, you literally can’t lose!

Mutual Fund Index Investments have been available in the US since the 1970s and have gained popularity here and abroad. They are a “passive” investment option that allows you to buy shares in a diverse portfolio, an index of the market, rather than a single company. You can hold them without having to “actively” manage a volatile stock portfolio. Index Investments seek to match the performance of the market. Matching the growth rate of the market over a longer-term in an index fund is a predictable and profitable strategy.

Call Options Trading– Zero Loss

Trading Index fund call options can add another layer of protection to your investing. If you are looking to invest in a fund that should increase in value, but want to protect your investment, rather than buying the shares outright you can purchase a call option. The call option entitles you to pay today’s price for the shares at the expiration of the option. Instant equity! However, if the shares’ value has gone down during that time, you are not obligated to buy them. Zero Loss!

For example, if the fund you are interested in is trading today at $100 a share, you could buy 100 shares for $10,000 or you could buy an option to buy the 100 shares at $100 apiece in the future. That option might cost you $1.75 a share. At the expiration of the option, if the shares are worth $120 each, you can still purchase them at $100 and even with the cost of the option your investment has instantly gained $1825 in equity. You might be thinking you would have been better off to just purchase the stock outright and have $2000 in equity– and if we always knew that the shares would increase in value you would be right. The real heroics of options trading are the protections in the event of a market downturn. Take that same example, but this time when the options expire the shares are only worth $87 dollars. If you had purchased the shares outright, you have lost $1300. But if you have purchased the option, you just let it expire and you have lost nothing! Zero is your hero!

Protecting your Money Twice

If the market takes an unforeseeable hit just as your option expires — think Coronavirus — you won’t be left holding the bag. You have protected yourself twice. Once when you chose a longer-term less volatile indexed funds to invest in, and again when you choose to buy the call options rather than the shares outright.

Smart Investing

The best investors know that it is impossible to guarantee growth in the stock market. But with a firm understanding of the systems available, and sound advice from an advisor you trust, you can mitigate risk enough to guarantee that you will not lose in the volatile markets.

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