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Chapter 9. Stock Selection and the Optio... > Dangers and Pitfalls in Using Option...

Dangers and Pitfalls in Using Options

Options, like so many aspects of the market, offer a wide array of temptations. The speculator is drawn to the positive aspects: leverage of capital with the potential for fast profits, often in triple digits, and the fast pace of the market. They rarely pay attention to the other attributes of risk associated with options: equally fast losses, long-position disadvantages, and the virtual impossibility of profiting from speculation consistently.

It is always tempting to go for fast and easy profits at the expense of conservative standards. However, you know that, by definition, your standards include resisting that temptation. You are aware that opportunity and risk cannot be separated and that those potentially high returns are usually accompanied by a similar high scale of risk. While there are exceptions within the options market, conservative strategies all have a common attribute: they are geared toward augmenting returns and protecting positions in your portfolio.


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