Options. One in ten who trade or own stocks use options. They just aren't using all their options. Yeah, options are supposed to be scary. Yeah, options are supposed to be risky. But guess what jelly bean? That's baloney. The vast majority of people who buy stocks believe that baloney. And you know what? That's great. Boy oh boy, is that ever great. We wouldn't have it any other way. The misconception that options are far riskier than stocks is likely to continue unchallenged. Why? After this bear market the vast majority of people who have purchased equities will think of stocks as a crap shoot. A risky gamble which they should never have gotten sucked into. They are shell shocked. If their accounts are not broke, their will has been broken. They don't have any courage left. Just for kicks, ask them about options. How are they most likely to respond? Probably something like, "Options? You must out of your freakin' mind!"

The fact of the matter is: options are far less risky than stocks.

Are you one of the buy and holders who purchased stocks between 1997 and 2000? You folks don't think the way you used to about stocks or mutual funds, do you? You probably thought of stocks as a valuable asset. Now you know different, don't you?

Linda liked hardware. Hi tech stuff. Her grandmother died and left her some shares of CSCO, INTC and T.

Al. Al bought 1,000 shares of Lucent Technologies, LU for his son's college tuition at an average price of $50/share. He bought stocks for his daughter's college tuition as well. Al bought lots of stocks. Al started buying stocks in 1995. A little at first, then more and more. We told Al to stop taking big chances and to limit his risk with options. You know what he said? He said that options were too risky.

Fred. Fred is an attorney. Fred didn't believe the wild stories about stocks and daytraders. Fred's brother was an engineer at Sun Microsystems in San Francisco. Fred's brother died and left him $30,000 worth of SUNW shares at $60/shr. Imagine Fred's delight when those shares hit $120. That was just before they split for the last time. That's when we suggested that Fred sell five call contracts for $12.50/shr. The calls were covered; Fred owned the stock. But Fred was married to his stocks. Options traders call this situation being married to the idea that one has something which will continue upwards in value indefinitely to who knows where. Up, up, up! Sure it might be up, up down, up. But the upward direction was assured by the five and ten year trends of the charts for the major indexes. Fred liked the feel of the stock appreciating. So Fred bought MFNX, Metro Media Fiber Networks. Why MFNX? Fred was an attorney who had perchance done legal work for Metro Media Fiber Networks and in so doing he had had a look at the books. The books looked good, too. So Fred bought 100 shares of MFNX at $70/shr. The chart showed a steep line up. Fred liked that.

Jane got into stocks, too. Jane didn't have the courage to buy the expensive stocks. But she thought that if she could just get in on the ground floor, she could get a good stock at a good price and it proved successful after the IPO, she would do well. Jane had been wary of the companies that had no earnings. She heard that a company which had an internet auction business had some good potential. She planned well in advance. She watched the price of EBAY from the very beginning of the first day. She put in several limit orders in succession. The orders did not fill. She had a final limit order for $32 dollars per share. The last time she checked the price had been $40. "Oh, well. Maybe next time," she thought. She fixed some lunch and twisted one up. Then she realized she hadn't cancelled her last order. She went back to the monitor and checked her order. It had filled! She had 100 shares of EBAY at $32/shr. Cool! She checked her balance...

We'll tell you more about Fred, Jane, Al, Linda, and others. When we get a round2it. Some used options. Some didn't.

You could start by familiarizing yourself with these terms in order to become comfortable with options:
Strike price
Call
Covered Call
Call Out
Naked Call
Put
Covered Put
Put To
Naked Put
ITM, In The Money
ATM, At The Money
OTM, Out of The Money
ROI

Then notify your broker that you wish to trade options and fill out the paperwork. They'll start you out at the beginner's level, selling covered calls and puts. There are four levels for trading options. We will only explain the first two levels. Why? Because the first level, covered options, provide you with additional relative safety and protection you require for stock investments. Level two, buying calls and puts, gives you leverage and control. If you were able to trade level three, combos and spreads or level four, selling naked options, you wouldn't be reading introductory information, anyway. You would necessarily have experience and a substantial margin.

Options have become a little bit more popular. Even Yahoo! now has a section called Yahoo! Options Education.
Excerpt from Basic Options Concepts:
"Since options cost less than stock, they provide a high leverage approach to trading that can significantly limit the overall risk of a trade or provide additional income. Simply put, option buyers have rights and option sellers have obligations. Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock (or futures contract) at a specified price until the 3rd Friday of their expiration month."
biz.yahoo.com/opt/basics1.html

Filthy lucre may be filthy but, lucre is lucre. Yahoo! has a particularly impressive set of webpages with concise info about options. If you're smart you won't tell the next person about the information in these webpages. Why not? Take a guess, silly.
Here's a sample from one webpage entitled, Basic Options Concepts: How to Use Options
"Creativity is rare in the stock and options market. That's why it's such a winning tactic. It has the potential to beat the next person down the street. You have a chance to look at different scenarios that they do not have the knowledge to construct."
"Luckily the next person, typically, does not know how to trade creatively."
biz.yahoo.com/opt/basics6.html
biz.yahoo.com/opt/education.html

What could be better than CBOE? For just the stats CBOE, of course. But for the rest of the story...

Sometimes a name change is the best idea.