A Better Option for Investing in Apple Inc. (AAPL): SPDR Gold Trust (ETF) (GLD)

Before mini-options were available, though, investors who owned less than 100 shares of stock wouldn’t have been able to execute a perfect covered-call strategy. If they had written a single call option, it would have covered more than their ownership stake in the company, leaving them vulnerable to having to buy additional shares of stock if the option-buyer exercised the call option. By contrast, with mini-options available in 10-share increments, it’s easier to write mini-options to give you the right level of exposure for the shares you actually own.

On the other hand, investors who want exposure to a stock’s upside while limiting downside risk can buy call options. For instance, a call option to buy Apple Inc. (NASDAQ:AAPL) stock for $450 any time between now and mid-April would cost you $16.50 per share as of yesterday’s close. If the stock rises to $500, then your option would rise in value to $50 per share, letting you triple your money. Meanwhile, if the stock falls to $400, you’ll lose every penny of the $16.50 you paid for the option — but that’s still far less than the $56 per share you would have lost had you bought the stock outright at yesterday’s closing price of $456.

Should retail investors buy options?
Most of the bad reputation that options get has to do with the fact that you can use them as ways to greatly increase the amount of leverage in your portfolio. Often, you can end up losing your entire investment when you buy an option. But if you use lower-risk strategies, then mini-options could help you do things you wouldn’t have been able to accomplish without them.

The article A Better Option for Investing in Apple originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger owns shares of Apple. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, and Google.

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