MARBELLA – An investor with options knowledge becomes a better investor. That is the statement of investment expert Hugo. Knowledge about the financial instruments that you can use when investing is very useful anyway.
Chances are that your investments (self-managed or managed by third parties) are made up of shares or bonds. To have a view of your positions, you should at least know the basic characteristics of those instruments. With options, however, the influence of your knowledge goes a little further. You don’t have to go straight back to school for it, but with just an hour of explanation (something for which you have come to the right place at Hugo), a world will open up for you. Because with options you can not only buy shares at a discount, but you can also insure your share portfolio against sharp falls. That should give you a calm feeling!
Not only do private individuals use options, but large financial institutions also opt for them to – among other things – hedge risks. Options are only the means. The way they are used determines whether it is defensive or speculative. And you, as an investor, are simply part of that. But as with everything: (basic) knowledge is necessary to understand what you are doing.
With the Option Matrix, you make it easy for yourself
Hugo Investing regularly provides the Options Matrix to investors who are guided by Hugo. The Options Matrix is a simple and effective scheme. This contains the (two) types of options and the consequences of buying and selling them. For many people, this information could have been very useful decades ago. For example, if they had known about the possibility of insuring their shares in SNS, World Online, etc. Curious? Request the Option Matrix form via firstname.lastname@example.org.
One step further with options
Of course, you can also use options via very specific constructions, for example, to exploit volatility, time value, etc. It is certainly worth taking a closer look at it, but Hugo will be happy if you only master the basics (the aforementioned Options Matrix). The aforesaid possibility of insuring your shares against a fall in value alone is worth an hour of reading or talking. After all, what other asset can do that? Another thing that may be of interest to you is receiving a premium on a written call option on your shares as an additional return. For example, in a portfolio with which you need to generate cash flow.
Hugo has often seen in practice that investors completely change course from this base. For example, they convert their entire portfolio into options. Then they no longer have shares and bonds, but only (index) options. To a layman that may sound like a speculative turn of events, but believe Hugo, it certainly doesn’t have to be the case. This step will of course only be taken by a seasoned option investor. By someone who knows all the ins and outs of options.
The most important thing for retail investors is that they take the time to understand how options work. Since options are more complex financial products than stocks, it’s even more important to learn the basics before investing in them. If you want to get a head start with options, you can purchase Hugo’s online Options for Beginners course. Or, if you already have more experience, become a real expert and start with the Options for experienced investors course.
Make money with options
For even more useful information about options, sign up for the free English-language seminar ‘Make money with options’. You can attend this on April 4 at 5.00 pm at Hugo in Marbella.
In this seminar, you will learn the first steps of implementing options in your investment and trading strategy. Hugo will address questions such as ‘why do only a few private investors use options?’ and ‘When do professional investors use options and with what success?’
Disclaimer: The information in this article should not be interpreted as individual investment advice. Although Hugo compiles and maintains these pages based on reliable sources, Hugo cannot guarantee that the information is correct, complete and up-to-date. Any information used from this article without prior verification or advice is at your own risk. We advise you to only invest in products that match your knowledge and experience and not invest in financial instruments of which you do not understand the risks.