SIE: 4.1.4. Benefits And Risks Of Options

4.1.4.  Benefits and Risks of Options

For conservative investors, one of the primary benefits of options is that they can be used to hedge an investment’s performance or hedge against broad economic downturns. By guaranteeing an investor’s right to buy or sell a security at a price in the future, an investor can limit the effects of a possible swing in one security or the broad market.

For example, an investor who has made a quick profit on a couple of mutual funds may want to protect her profits until she’s held the positions for a full year and can sell them (ensur