A Possible Choice For Your Portfolio
Options are one of the more versatile investments available today. Conservative investors can appreciate the reduced risk and the potential to earn more per dollar invested than individual stocks, while aggressive investors can enjoy the additional leverage and increased market exposure they bring with very little invested capital. However, options operate under a different set of rules than stocks. The guidance of your CIBC Wood Gundy Investment Advisor is vital in deciding if options are a suitable choice for your portfolio.
Values And Benefits
An option is basically a contract between a buyer and seller based on an underlying asset or security. This contract provides the holder with the right to buy or sell shares at a predetermined price (the exercise price) for a specific time period (before expiration). The goal with options is to try and anticipate the future value of the underlying asset. Options available include listed equity, stock index, bond and currency.
Benefits Of Options
Options offer the following advantages:
- The potential to earn more per dollar invested. For example, the cost of buying an option is usually cheaper than buying each stock outright
- Market restrictions usually associated with stocks, such as limitations on short selling, don't apply
- Increased portfolio diversification
Given these benefits, wouldn't everyone want to invest in options? Just as options have their benefits, they also have characteristics that make them less attractive to certain investors, such as potential loss of investment, time sensitivity and volatility. Because of these concerns, you should always seek expert advice and review your personal financial situation to determine their suitability for your portfolio over time.
Find An Investment Advisor
Determining if options are right for your portfolio can be complex and time consuming. Your CIBC Wood Gundy Investment Advisor can help you determine whether they suit your risk and investment profile. To find out how we can help you, use our Find An Advisor tool to contact a CIBC Wood Gundy Investment Advisor near you.
The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only.
Clients are advised to seek advice regarding their particular circumstances from their personal tax advisors.