Dueling Fools: Options
By
Rick Aristotle Munarriz
January 12, 2006
|
Stock options? Friend or foe? It's easy to see it both ways. It's the Dueling Fools Way.
Stock options cause a particularly high level of confusion -- if not outright apprehension -- for some investors. They see stock options as a speculative game. It can certainly be played that way, but stock options aren't just for wild traders. Something as simple as selling a covered call may prove to be one of the tamest equity investing strategies.
That's where financial editor Jim Fink comes in. He's bullish on options as an effective tool in improving financial performance. Options are big business. Last week alone, there were 18.6 million calls, and 13.3 million puts were traded.
Big news or even a whiff of speculative fervor can perk up option activity, like the 57,000 Sun Microsystems (Nasdaq: SUNW) options that were traded in a single day last week, when the market began to wonder whether Sun and Google (Nasdaq: GOOG) would be beefing up their software alliance in an effort to take on rival Microsoft (Nasdaq: MSFT) more aggressively.
Naturally, we have the flipside to options. Not only can an options trader take on too much risk, but investors can also feel the sting from another form of stock option usage -- as an incentive to corporate executives. That's where Chuck Saletta, our bear this week, is digging in his claws. He thinks employee stock options are a privilege that can easily be abused by self-serving executives.
We'll explore both sides this week. There won't be any rebuttals this time, as you'll find in our stock-based bouts, but I trust you'll find it interesting all the same.
Duel on!
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