Options and Warrants
Did you know that most advisors aren't acccredited to advise in options and warrants?
As part of our sophisticated offering to IMA clients, at RBS Morgans Parramatta we are accredited to use ASX options and warrants (also known as derivatives) to protect capital and generate extra income from exisitng portfolios. To start using these strategies within your portfolio, read more about the benefits of using derivatives in your investment strategy.
The benefits of investing in Derivatives
| Risk Management | A simple strategy is to use put options to allow investors holding shares to hedge against a possible fall in their value. This can be considered similar to taking out insurance against a fall in the share price. |
| Time to Decide | By buying a call option the purchase price for the shares is locked in. This gives the call option holder until the expiry date to decide whether or not to exercise the option and buy the shares. Likewise the buyer of a put option has time to decide whether or not to sell the shares. |
| Trading | The ease of trading in and out of an option position makes it possible to trade options even if there is no intention of ever exercising them. If an investor expects the market to rise, they may decide to buy call options and vice versa. Either way the holder can sell the option prior to expiry to take a profit or limit a loss. |
| Leverage | Leverage provides the potential to make a higher return from a smaller initial outlay than investing directly. However, leverage usually involves more risk than a direct investment in the underlying shares. Trading in options can allow investors to benefit from a change in the price of the share without having to pay the full price of the share. |
| Diversification | ASX's Options Market allow investors to build a diversified portfolio for the same or even lower initial outlay than purchasing shares directly. |
| Income Generation | Share holders can earn extra income over and above dividends by writing call options against their shares. By writing an option they receive the option premium upfront. While they get to keep the option premium, there is the possibility that they could be exercised against and have to deliver their shares to the buyer of the option at the exercise price. This is called a 'covered write' strategy. |
| Strategies | By selectively mixing calls and puts, investors can create a wide range of potential scenarios. To find out more about options and strategies read our Options Strategy booklet |
Talk to us today about incorporating Options and Warrants into your overall Wealth Creation strategy.
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