Ask the Institute

QUESTION:
I follow good, quality stocks. When the market has a big down day, I buy these stocks because I think I'm getting a good price. Can options be used to complement my strategy of buying low?

ANSWER:
Many investors use options to complement the way they buy and sell stocks. Options can be used to complement your strategy of trying to get, from your perspective, a low purchase price for a stock you want to buy. For example, by implementing a cash-secured put option strategy, you can sell a put option and create an obligation to buy 100 shares of the underlying stock at the strike price of the put. To learn more about implementing a cash-secured put option strategy with an example selling 1 XYZ March 50 Put, view this segment of "Ask the Institute."