Investing in the Stock Market

Options are comprised of "puts" and "calls". They can be purchased on a short-term period basis, or a long-term period basis. Options are not con-fined to any particular type of stock, or stocks which manifest a particular type of activity. That is, they can be used with stocks that are either strong or weak, aggressive or passive. In addition, options can either be purchased or written.

Options are very speculative and, thus, they involve substantially greater risks and are subject to price volatility than common stocks. Even though they are more risky than common stock investment, options are less risky than futures trading. The use of options in investment strategies is quite risky because, in a sense, they involve "all or nothing" bets. For example, if the investor purchases a three-month call option on a particular firm's stock, he is given the right to purchase 10

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n fact, even before the Securities and Exchange Commission interceded on the behalf of mishandled clients, several brokers were sued by their clients. In time, a small amount of these lawsuits were found in the clients' favors ("Keeping", p. 96). The market-shattering impact of infamous "insider trading" did not help the state of the stock market - and thus options potential and orders. With the Securities and Exchange Commission (SEC) putting forth unprecedented efforts to bring stock market activities under control after the 1987 Crash, numerous large, prestigious stock houses and investment firms have been subjected to prosecution and huge fines. In fact, some of the highly successful traders and brokers of these firms have not escaped the wrath of the SEC. As a new part of its efforts, the SEC has petitioned Congress to give it powers to further police the stock market and its players. The SEC now seeks the power to block persons who were convicted of securities violations from serving as officers or directors of companies that are required to report to it (Causey, 1989, p. 1). Although more than a year has passed since the 1987 Meltdown, the SEC is not yet finished prosecuting the various brokerage and investment hous
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Approximate Word count = 3686
Approximate Pages = 15 (250 words per page)

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