An investor writes a call option and buys a put option with the same expiration as a means to hedge a long position in the underlying stock. That is a very nice gain, and I bet many a money manager would love to have that type of return. LEAPS typically expire in January a year or two from the current month. Although our employees may answer your general customer service questions, they are not licensed under securities laws to ooption your particular investment situation. For each play, she covers the basics, main Video Series Industry News. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options.

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Okay, so let's say you're holding a big share position in a particular company, but you're facing a dilemma. For one, you're not comfortable because of the way the market is acting. And second, you're not sure how recent news may affect the company's forward guidance. As if what is a short term call option isn't enough, few events can influence the short-term direction of share prices like earnings season That's the situation that faced many Visa, Inc. NYSE: V shareholders a few weeks ago.

Not Cash or Charge A few weeks ago, Visa's debit card business was in the government crosshairs. Specifically, the government was concerned that Visa was charging merchants too much for debit card processing. Debit cards are like cash and Visa charges merchants a percentage of the transaction total on every debit payment it processes. Visa hands the card's issuing bank a big chunk of that transaction fee.

And the retailer passes the fee on to the consumer as part of the product price. Visa's business was under the threat of government regulation just weeks before the company released earnings. And shareholders were free trades merrill lynch right in the crossfire. But the issue for shareholders was this: What would Visa say about its future earnings as a result of the new legislation?

Would it guide lower? Would the news be priced in? Would the stock tank once investors heard the news? To handle an unpredictable situation like this, it's the only time that I advocate using short-term call options. But only with certain assumptions. You might give up a few percentage points worth of potential gains on your shares if the share price might move higher. You're not expecting a catastrophic share price collapse, but with the price likely to move lower, you'll protect your downside.

So in reality, here's your safety net trade please note that this is not a specific trade recommendation, just an example of how this strategy works And the upside was also fairly limited, since the news wouldn't be perceived as "great. If Visa shares moved lower : You'd be covered since the options premium received would offset the decline in share price. You could simply buy back the option and maintain control of the shares. When you have a lot of money at risk, it's prudent to do more than just "hope" that things will work out fine.

And with options, you can do just that. You are logged into Investment U Plus. Urgent Report on China. These reports are exclusive for Investment U subscribers. For immediate access, please join Investment U by entering your email address below. About Investment U and The Oxford Club. Short-Term Call Options: The Only Time to Use This Investment Strategy. Tuesday, August 10, Will This New Currency Replace Your Dollars?

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We expressly forbid our writers from having a financial interest in their own securities recommendations to readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Understanding Calls and Puts

Video embedded  · Term Of The Day. Competitive What is a ' Call Option ' BREAKING DOWN ' Call Option ' Call options are typically used by investors for three. ProShares Short VIX Short Term Futures ETF ProShares Short VIX Short Term Futures ETF (SVXY) Option Chain . SVXY. $ Call and put options are quoted in a. the investor receives a minimum price where the stock can be sold during the life of the collar. Outlook. For the term of the option short call option.