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Options

There are two types of options, calls and puts:

Call options are sophisticated investments you can buy when you want the right to buy a stock at a certain price by a certain date because you believe the price of the stock is going to rise. You don’t have to invest directly in the stock—you can just buy the option.

If you can sell the option for a higher price than you paid for it, you make money. Or, you could use your option to buy the stock and then sell it at the higher market price. If you do not exercise or sell the call option by the date it expires, it becomes worthless and you lose the money you paid for it.

Put options are investments you can buy when you want the right to sell a stock at a certain price by a certain date because you believe the value of the stock is going to fall. Put options can also protect your portfolio from loss when you buy a stock.

You can make money two ways with a put option. If the stock drops in value, you can hold onto it and use the put option to sell at the higher price. If the stock goes up in value, you sell the stock for a profit and let the put option expire.

Call and put options are complex, sophisticated investment strategies best performed with the guidance of your Macquarie Private Wealth Investment Advisor.


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