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Learn when and how to effectively use options in your investment strategy

1. Hedging Risk (Insurance)
Protect your portfolio

Example:

You own 100 shares of TSLA and want to protect against a drop.

Action:

Buy a protective put (limits downside risk).

Why Options?

Cheaper than selling stock; defines max loss.

2. Speculating with Leverage
Amplify your returns

Example:

You believe NVDA will rise but don't want to buy shares.

Action:

Buy a call option (small capital, high upside).

Why Options?

More leverage than stocks (higher % gains).

3. Income Generation
Selling premium

Example:

You think SPY will stay flat or rise slightly.

Action:

Sell a covered call (earn premium while holding shares).

Why Options?

Generates passive income in sideways markets.

4. Betting on Volatility
Not direction

Example:

Earnings season—you expect AMZN to move sharply but don't know the direction.

Action:

Buy a straddle (profits from big moves up or down).

Why Options?

Stocks can't profit from volatility alone.

5. Capital Efficiency
Defined risk strategies

Example:

You want to bet on AAPL rising but limit losses.

Action:

Use a bull call spread (lower cost than buying stock).

Why Options?

Defined risk, less capital than buying shares.

🚫 When NOT to Use Options
  • Short-Term Gambling – Buying weekly OTM options is like buying lottery tickets (most expire worthless).
  • Without Understanding Greeks – If you don't know Delta, Theta, or IV, you'll lose money.
  • Illiquid Markets – Avoid options with low volume (wide bid-ask spreads = bad fills).

Disclaimer: This application is a personal proof of concept created for study and research purposes only. All analysis, suggestions, and content are generated by AI models using publicly available data and tools, and should not be considered as financial advice. Past performance is not indicative of future results. Always conduct your own research and consult with qualified financial professionals before making investment decisions. The app's AI models may have limitations and may not account for all market factors or recent developments. Users are solely responsible for their investment decisions and should understand that all investments involve risk.