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Covering Your Options

By Elliott H. Gue, on Sep. 13, 2016

The mere mention of options terrifies many investors and calls to mind complex trading strategies or aggressive bets that involve significant risks.

Although these fears aren’t necessarily unwarranted, individual investors can use a few simple options strategies to generate additional income from stocks that they already own and reduce their downside risk. Even better, you can execute these trades in virtually any brokerage account.

Here’s a quick primer on how to write covered calls (one of the simplest strategies) and some trade ideas involving names in our Wealth Builders Portfolio.

Call options are contracts that give you the right—but not the obligation—to buy a stock at a specified strike price on or before a predetermined expiration date. Similarly, a put option gives the owner the right to sell a stock at a specified strike price on or before a certain expiration debt.

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