Option Investing

Insomniacs everywhere doze off (at last!) to the background sounds of the TV humming away over there, just at the very edge of waking consciousness. The screen is abuzz with vibrant, happy people in alluring tropical settings eager to tell you how they made bazillions, almost overnight, by trading in options. What are options, anyway?

Option investing is a bit trickier than more traditional stock or mutual fund investing. For one, it has a language all its own. A rather archaic language that can become confusing for the novice investor.

And instead of trading actual shares of stock, option investing buys only the right to buy or sell at a particular price by a particular date. Knowing what price to set, when to time the trade, and whether to buy or sell are fundamental factors to consider when option investing. It is strongly recommended to pursue this type of investment using only extra money available after all expenses, savings, and traditional investing goals have been met comfortably.

The highly speculative nature of option investing can lead to spectacular gains and to some very dismal losses, too. Because the highs and lows can swing so wildly, another strong recommendation is to invest your options money only in a company you know and understand intimately. Get to know their product line, board of directors, competition, employee issues, marketing strategies, every nuance possible, to improve your chances of staying ahead.

Option investing is complex. Those beautiful people on late-night TV infomercials make it sound so easy anybody can get rich overnight but it's always the wise investor who remembers that there is quite simply no free lunch.

But now that you're awake again, how about a midnight snack?