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3 Key Conservative Option Strategies

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Can options work in a conservative way and actually help protect your portfolio?

Most conservative investors traditionally have seen options as high-risk, speculative plays on short-term market swings.

This is understandable when you think of the many high-risk option strategies available. But increasingly, options are going mainstream as even the most risk-averse investors are finding ways to use option contracts to lower risks and protect their long stock positions.

Three basic ways this is accomplished:

1. Covered call writing. The covered call has two parts: Ownership of 100 shares of stock, offset by the sale of a call. When you sell, you grant someone else the right (but not the obligation) to buy your 100 shares at a fixed strike price, on or before a specific expiration date. You keep the cash you get for selling the call and all dividends you earn before exercise.

If...


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