An equity option is a contract that gives the purchaser the right, but not the obligation, to buy or sell a stock at a specific price within a certain period. Options may be used to accomplish a variety of objectives, such as increasing income, acquiring stock, managing risk, hedging individual positions or entire portfolios, and for speculation. Options trading involves risk and is not suitable for all investors. Options should comprise only a modest portion of a portfolio. To learn more about Options strategies and terminology, check out these informative videos.
An options investor may lose the entire amount committed to options in a relatively short period of time. Also generating income from covered calls does not provide protection from significant downward price movement. A covered call writer also gives up any appreciation above the strike price, and the sale of shares due to assignment may result in a taxable gain for the option writer.
For suitable investors who are comfortable with the risk/reward challenge that options present, Raymond James has access to all U.S. option exchanges. Prior to making any options transactions, investors must receive a copy of an options disclosure document titled “Characteristics and Risks of Standardized Options.” This document can be obtained from your financial advisor’s office or at the following url: http://theocc.com/publications/risks/riskchap1.jsp. Please contact your financial advisor today for more information, or use the Office Locator to find our office(s) nearest you.