Fox Business
Expand
Browse All Video
Watch Live

You're watching...

Why Should Investors Trade Options?

Details

  • Description

    NYSE Euronext Options CEO Steve Crutchfield on the benefits of options trading for investors.

  • Duration 4:58
  • Date

Clips

Also in this playlist...

Latest Video

Auto-advance: ON

Auto-advance
View All

Transcript

This transcript is automatically generated

Is come in many shapes and sizes hundreds and hundreds for even one single stock but they all have one goal.

To make you money today -- get on options trading 101 lesson from a man who knows that all he's the head at US options for night C Euronext joining me now on a Fox Business explicitly Steve Crutchfield nice.

CEO we throw these terms -- -- -- movie options action is indicating that some CEOs going to get fired an -- and started to think -- -- Exclusionary to viewers who may not really understand and we thought let's take a -- -- college you know -- of the closing bell college but first off.

Why would people want to trade options short of something easy sure and I think.

Options are proud to people don't understand as well certainly as we'd like side NYC Euronext options are an important role -- part of our business.

But a lot of investors I think options get lumped into the larger category of derivatives which -- may be perceived as being a little bit -- your -- Harry yeah exactly so it's important I think people understand that options are necessarily high risk speculative investment.

There's some very basic option strategies that can reduce the risk or increase the return of a portfolio.

Well.

OK so you say that -- that there's a real place for them and that I love this very approachable.

For -- never bought one how to they go about doing.

Sure so almost any of the major online brokers will allow options trading and have their useful tools which explain which sort of options one might wanna trade so for example of -- -- in purchasing a protective put.

A put option is an instrument that pays off more as the as the market or the underlying stock drops over time.

So we think it is being really something like an insurance policy on a portfolio.

If you a lot of money tied up in your house you very likely what have fire insurance flood insurance whatever the case -- be to protect yourself.

Similarly when you purchase a protective put.

You've got a lot of many potential in the stock market -- or chunk of of of your network for retirement assets that helps protect you in the event that there is potentially.

-- outlined -- right -- so -- puts are for when you need a little insurance if something goes wrong and cults they committed some calling it and I'm like this.

Opportunity is more but bullish -- that's right so what won't -- purchase calls as a way to have upside in the market.

But also little -- -- downside protection relative just buying the stock or a covered call is a very common strategy was to net income to -- -- what.

Give an example to people right around the time this is -- Vikram Pandit and Citigroup chuck prince was running the show and about a week before the real news.

You started to see incredible options action around Citigroup stock.

And if you read between the lines of these options -- get get better and better added it looked like people were betting the chuck prince was gonna go he eventually did.

The threat that and very often you see that type activity activity in the options market can indicate.

What investors think may happen in the future options have a certain not time to expiration associate with them -- -- -- indicate.

Potentially when it's perceived that a particular event might take place in the equities mark.

You have been having your best month ever at the Amex options area.

So either people are getting more comfortable with -- options or something's going on with the markets which is -- well I think it's.

-- are committed to grow our options business your rights NYC Euronext are two options exchanges at NYC MX options and NYC -- options.

Sure we have more than 28% market share which is record -- -- you are an -- exchange from off 5% market share couple years ago now -- for the first time ever this month about seventeen point seven.

So another record there for -- very pleased with that growth.

Think it speaks to a couple of things first of all we'll continue to try to innovate offer new products that appeal to investors who we -- the first exchange's offer weekly options rather than options -- only expire on a monthly basis.

Also were working very closely -- bodies like the options industry council.

Which is an industry body dedicated to educating investors and particularly the retail public about.

The benefits of the options product continue to shield website is that we're paying that people could go and understand -- eleven absolutely options industry dot org.

Which explains a lot about how investors can trade options and use them as part of their -- You look every morning at a screen and see a lot of options an apple or something like that made apple coming out with earnings would a week ago have been -- a time where -- start to see a lot of that activity.

Absolutely and I I will say -- stock like apple because it's kinda hot sort of always in the news right you tend to have high volumes all the time but certainly they do pick up around earnings events like today around expected volatility.

And -- how about legal.

It legal issues where there's going to be a ruling you start to see a lot of options around something like that it exactly for example for some of the drug or by technology companies we often see a lot of activity going into potentially an FDA announcement where do you see.

The options activity and how how exciting it's getting sure so most -- the -- -- broker web sites will display options volume.

The OCC dot com options clearing corporation -- displays options volume on a daily basis with a breakdown on which exchange third they're being traded on the most.

So there a lot of sources to see this type of activity get a sense of what the options market is saying.

Great to see you Steve you've already educated people we're gonna do more of -- -- classroom because we want our viewers to become smarter investors thank you so much thanks very much for having a steep Crutchfield -- CE Euronext option CEO could emerge.

Load More