manage portfolio risk with options

How Options Work

An option is a financial contract between two parties regarding the right to buy or sell a contact of an underlying financial instrument at a specified price on or before a specific date. There are two types of options: calls and puts. An investor can buy or sell either type. The buyer of a "call" has the right to buy the underlying security. The seller of a "call" has the obligation to sell the shares; if requested by the buyer.

Options are complex securities and can be used as a way to manage portfolio risk, the underlying financial instrument are traded on the major exchanges*.