Sunday, 15 November 2009 12:46

Q. I read an article from yahoo about options, and watched some videos on Youtube, but I still don't get it. How does it work? Can anybody show me a demo? I really want to do options, because stock gains are too small. Thank you.

A. Options are conditional contracts, that give you the right to purchase securities in the future, at a pre-agreed price. Having answered what they are, let me get down to business.

I really wonder who deceived you into that. As an investment banker I had to spend a lot of time with option portfolios. And I will tell you that no matter what retail brokerages tell you, options are not for individual investors. Options are for investment banks, so they can manage their risks. And investment banks pay six-figure salaries to math and physics PhDs to figure out their option exposures. Don't do options, unless you want to waste your capital.

Hope you stay away from trouble.

Good luck!

Moni.