Kim Snider
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July 12, 2006

Lies Advisors Tell: Options Are Risky

Options can't be inherently risky. There is one winner and one loser on each side of an option contract. When the buyer wins a dollar, the seller loses a dollar, and visa versa.

 

The problem is not with options but with the way people are taught to use them. If you want to use options to gamble on the future direction of stock price, you might as well pile your money up in the front yard, pour gasoline all over it and light a match. You are placing a bet - a highly leveraged bet no less - on a random event. What do you expect to happen?

 

It is a travesty that so many individual investors are sucked into seminars that teach them how to use options to lose their money. It's just wrong - and that is why the myth, that options are risky, persists. But it is also wrong to say options are risky. It is using them incorrectly, like grabbing a knife by the sharp end, that makes them risky.

 

Gambling is not how institutional investors - pension plans, insurance companies, foundations and endowments - use them. It is not how the Snider Investment Method™ uses them.

 

Options are a tool. When used correctly, by someone who understands them, the purpose they should serve is to manage risk – to hedge risk – not to increase it.

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

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Kim Snider is an author, speaker and host of Financial Success Coaching, Saturdays at noon, on KRLD Newsradio 1080, Dallas - Fort Worth. This blog is primarily devoted to empowering individual investors with information to help them be good stewards of their money. Above all, it is about achieving true financial success. Kim's book, How To Be the Family CFO: Four Simple Steps to Put Your Financial House in Order is in bookstores now. Order yours from Amazon or other fine booksellers today.

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