Part of what makes options so popular is that they
can be used in all market conditions by investors with a variety
of goals and different levels of risk tolerance.
For example, you might write covered
calls for the premium income they provide. The only
real risk you face is having the option exercised and assigned
to you, obligating you to deliver your stocks to the option holder.
Bearish
and bullish
Options can be successful investments in both bear
and bull
markets, unlike stocks, for example, which are usually
profitable only in bull markets.
Investors who anticipate a market downturn might:
Purchase puts to lock in profits on stock they've held for some time.
Sell puts to have
the opportunity to purchase at a discount stocks whose prices,
they think, will eventually rise.
Bullish investors might use options to:
Leverage profits
from gains in a stock's price.
Lock in a purchase
price for a stock they'd like to own.
Bearish
and bullish