Options trading plays a multifaceted role in portfolio management, offering a range of strategies to enhance returns, manage risk, and achieve specific investment objectives.
Enhancing Returns:
Covered Call Writing: Selling call options against a long stock position generates premium income, boosting overall returns. This strategy benefits from stock price stability or moderate declines but caps potential upside gains.
Cash-Secured Put Writing: Selling put options requires a cash reserve to cover potential stock purchases, generating premium income while potentially profiting from stock price declines.
Long Straddle: Buying both a call and a put option on the same underlying asset with the same strike price and expiration date allows investors to profit from large price movements in either direction. This strategy suits volatile....
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