What are options?
Options are contracts between two parties, giving the buyer the right – but not an obligation – to buy or sell an underlying security at a predetermined price at a specified time in the future.
They allow you to ‘lock in’ a future buy or sell price for a security, allowing price certainty. Options can:
- Mitigate risk in a falling market
- Enhance profit in a rising market
- Generate income in a flat market
When used well, options may have the power to protect, grow or even diversify your investment portfolio. As options can be used regardless of market conditions, they are popular with many investors.
Like any investment, options have risks you need to understand. You should seek independent advice from a professional adviser before investing.