The Index Options

When you invest in only one or two stocks, you are taking the chance that they might not go up when the market does. Most people cannot afford to buy variety of stocks wide enough to fluctuate with the entire market. But now there is a relatively new investment. They are designed to let investors profit from the rise or fall of the total market.

Index option s are like stocks options. they give you the right to buy or sell securities at a predetermined price anytime before the option expires. an option to buy a call , the right to sell is a put.

When you buy such an option from a broker, you merely place a bet that some broad index of stocks will rise or fall. usually within the next 90 days. an index option usually cost only a few hundred dollars, but you could reap the same profits as if you had invested.

That is because a small move up or down in the index can cause a much bigger change in the value of the options trading. and the chills. Because if you wager wrongly you lose everything you had invested.