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Transcript
What if I told you there were certain assets you might want to trade when stock prices go down?
Keep watching and learn more.
In this video we’ll talk about stocks and options and how each may fit your goals, depending on a couple of different things.
The first: whether you’re bullish or bearish – are you optimistic or pessimistic?
The second: time frame – are you a short-term optimist or a long-term optimist?
Let’s pretend your favourite company is Owlwerkz.
You think that Owlwerkz is a real up-and-comer and then in 10, 15 years they’re going to build their way up from small insignificant widget maker to big time tech giant.
You’re long-term bullish – optimistic about a long time span.
And in that case the stock might make sense for you.
However, let’s say Owlwerkz is dropping its new Widget 3000 in three weeks and you’re confident it’s gonna take the world by storm, causing a big jump in the stock price.
You could invest in the stock but one alternative would be buying an option.
Specifically, a call option.
Why?
By purchasing an option that expires in a month you would have access to more potential gain.
If you’re right the Widget 3000 really takes the world by storm and the stock price rises.
You could make more profit than if you had just bought the stock.
The downside?
If you’re wrong you could lose the entire investment, though you usually have to put in less than if you were to buy the same amount of stock.
That’s two great options for bulls, but what about bears?
Well, if you’re pessimistic in the short term and you think the Widget 3000 is going to be a total failure that burns the stock to the ground, one asset you could look at is a put option.
Buying a put option reserves your right to sell shares at a certain price, which means, if the stock price drops, you could make some profit.
And for any long-term bears out there: well, you might want to find another company to invest in, like a competitor making the industry-leading SuperWidget 4000.
Options are exciting because they let you engage with the market in ways that stocks don’t.
That said, not every investment is for everyone.
You got to consider your own goals.
And that’s why eToro lets you choose – we give you options.
Explore eToro options today.