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Options. These are contracts that give you the right to trade an asset at an agreed-on price for a specific period. Options are more technical and riskier than stocks, ETFs and mutual funds.
Options are contracts that give investors the right to buy or sell an asset at a particular price, on or before a particular date. The most basic options are “put” and “call.”
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In finance, an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option.
Hence, a purchased option can never have a negative value. [4] This is because a rational investor would choose to buy the underlying stock at the market price rather than exercise an out-of-the-money call option to buy the same stock at a higher-than-market price.
Disciplined options overlay strategy: The ETF writes out-of-the-money call options on the S&P 500 index to generate distributable income each month. These options are above the index's current level.