The Tools at our Disposal

Over the last 13 years volume on the Chicago Board of Options Exchange (CBOE) has increased 252%! This huge increase in options is not an accident or popular fad. Options are becoming more and more popular in the world of investing and trading Advisors as retail investors come to an understanding of how options can help with a portfolio.

The three main reasons options are used are:

  1. Income
  2. Protection
  3. Speculation

It’s important to note that we at IGGA only use options for 1 and 2, income and protection. We don’t consider ourselves speculators in the market. We consider ourselves probability investors. Buying options is mostly about speculation which does not normally come with a high probability of success. Selling options on the other hand is where you can align the probabilities to give you a better chance of winning than losing.

Below are the strategies that we can implement for our clients along with the core reasons for why. We call it “strategy tools” and we apply them when it makes sense based on risk tolerance, goals, objectives and individual situations.

StrategyPrimary PurposeSecondary Purpose
Covered CallsIncomeRisk reduction
Short (naked) PutsIncomeBuying stock
Short Vertical SpreadsIncomeRisk reduction
Long Vertical SpreadsRisk Reduction
Long PutsRisk Reduction
CollarsProtection on concentrated stock positions

Options are not suitable for all investors. Option trading involves high risks and you can experience a significant loss of funds invested.