Using Options as a Stock Investor | James Boyd | 1-2-24
Characteristics and Risks of Standardized Options.

In our session today we discussed starting off the year in 2024! We reviewed recent examples prior to the holidays and how to exit or roll the positions. We also discussed how to use lower volatility to practice using married put strategies which are long stock and long a put option. Join us as we evaluate and practice a new short put vertical candidate as well.

You’re focused on building a stock portfolio and preparing for retirement. You’ve heard of technical analysis, fundamental analysis, and trading options. But how do you put it all together? Join your education coach to learn how all of the pieces fit together in your whole portfolio. This weekly webcast will focus on investing in growth and value stocks based on sector strength and fundamental analysis and will help you discover how to use technical signals and market conditions to potentially hedge or enhance your portfolio with options.
1023-3KVR

Options involve risks and are not suitable for all investors. Please read the Characteristics and Risks of Standardized Options carefully before trading.

Scripts are not guarantee for accuracy or time.

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Nasdaq Profit Taking Leading to Rotation: Using Options as a Stock Investor

The Nasdaq composite index has been one of the top-performing stock market indexes in recent years, propelled by the strong performance of technology and growth stocks. However, in the past few weeks, we have seen profit-taking in the Nasdaq, which has led to a rotation out of these high-growth stocks into other areas of the market.

This rotation has been driven by a variety of factors, including concerns about inflation and rising interest rates, which have negatively impacted the valuations of many high-growth stocks. As a result, investors have been selling these stocks and moving their capital into more defensive sectors such as utilities, consumer staples, and financials.

For stock investors looking to manage risk and take advantage of potential opportunities during periods of market rotation, options can be a useful tool. Options provide the ability to hedge against downside risk and potentially profit from market movements, all with a limited amount of capital at risk.

One strategy that stock investors can consider during periods of market rotation is a covered call. This strategy involves owning shares of a stock and then selling call options against those shares. By doing so, investors can generate income from the premiums received for selling the options, and potentially profit from the stock’s appreciation up to the strike price of the call options.

Another strategy that can be useful during market rotation is a protective put. This involves buying put options on shares of a stock an investor owns, which provides downside protection in the event of a market decline. While this strategy involves an upfront cost, it can provide peace of mind and limit potential losses in a market downturn.

Furthermore, for investors looking to capitalize on potential opportunities in other sectors during a market rotation, options can be used to execute a strategy such as a vertical spread. This involves buying and selling options with different strike prices to profit from a directional movement in the underlying stock.

It’s important to note that options trading involves a level of risk and may not be suitable for all investors. It’s important to have a solid understanding of options and their potential risks before incorporating them into an investment strategy.

In conclusion, the recent rotation out of high-growth stocks in the Nasdaq has created opportunities for stock investors to use options as a tool to manage risk and potentially profit from market movements. By employing strategies such as covered calls, protective puts, and vertical spreads, investors can navigate market rotations with confidence and potentially enhance their overall investment returns. As always, it’s important to conduct thorough research and seek the guidance of a qualified financial professional before implementing any options trading strategy.