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Chapter 6. Alternatives to Stock Purchase

Chapter 6. Alternatives to Stock Purchase

Most investors start by looking for stocks they want to buy. But with options, there are many other ways—safer ways—to enter the market. Contingent purchase using either long calls or short puts is a powerful weapon in your strategic arsenal. Options can also be rolled forward to avoid exercise or applied to recover paper loss positions. This chapter explores these ideas and demonstrates how the ratio write can be converted into a risk-free conservative strategy.

Options open up a range of contingent strategies. Covered calls are interesting because they are the ultimate low-risk form of contingent sale. If and when exercised, the covered call is designed to produce current income consisting of both dividend income and call premium.


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