Abstract
The selection of options based on appropriate risk levels and stocks makes more sense than the selection of stocks to maximize option returns. In other words, any position combining option and stock positions should be based on well-selected stocks held in a trader’s portfolio as long-term investments. The alternative, for those interested solely in speculating in options, is to (a) accept higher-risk positions from speculation trading, (b) hedge high-risk positions with option-based coverage, or (c) be aware that long positions in stock are taken up not as investments but as hedges for option positions.
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Notes
- 1.
Hutcheon, R. J. (1922). Speculation, Legitimate and Illegitimate. International Journal of Ethics, 32(3), pp. 289–305.
- 2.
Wei, S. X. & Zhang, C. (2006). Why Did Individual Stocks Become More Volatile? The Journal of Business, 79(1), pp. 259–292.
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Thomsett, M.C. (2018). Options and Stock Selection. In: The Complete Options Trader. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-76505-1_8
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DOI: https://doi.org/10.1007/978-3-319-76505-1_8
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Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-76504-4
Online ISBN: 978-3-319-76505-1
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