Options are contracts that give their buyer the right—but not the obligation—to buy or sell an underlying security for a specified price on or before a specific date. These investments offer potential opportunities for experienced investors who are looking for strategies to: - Help enhance returns
- Preserve their portfolio value, or
- Take a bullish, neutral or bearish stand on an underlying security.
Underlying securities can be a stock, index, exchange traded fund or currency. Keep in mind that options are not suitable for all investors, as they carry significant risks.
Types of Option Contracts
There are primarily two types of option contracts:
- Calls - A call option gives the buyer the right, but not the obligation, to buy the underlying security at a predetermined ("strike") price any time before the option contract expires. This creates an opportunity to share in the upside potential of a security without having to risk more than a fraction of its market value price.
Despite risking only a fraction of the market value of the security to own the call option, an investor could lose 100% of the option's value if the underlying security is trading below the strike price of the call option at expiration. And unlike shareholders of common stock, options do not pay dividends or convey voting rights to the option holder.
- Puts - A put option gives the buyer the right, but not the obligation, to sell the underlying security at a predetermined ("strike") price any time before the option contract expires. Put options are purchased when an investor anticipates downward movement of the security. Buying the put option enables the investor to protect against some downside risk.
However, an investor could lose 100% of the option's value if the underlying security is trading above the strike price of the put option at expiration. Your Financial Advisor can evaluate your portfolio and may be able to recommend appropriate option strategies that fit your risk tolerance and financial objectives. | 
