People who are near retirement age, or who are already retired, generally can't afford to take much risk in their investment portfolios. So it might sound completely ridiculous to suggest that conservative investors could help manage their risk by using stock options.

Yet while many see stock options as being inherently risky, many strategies exist that can actually help stock investors reduce their risk. Although options do make it possible for you to take highly leveraged positions, there's no requirement that you do so -- and if you're more prudent about the options you use, you'll find that they can bring unexpected benefits.

Options for risk-averse investors
In this month's brand-new issue of the Fool's Rule Your Retirement newsletter -- which gets released online this afternoon at 4 p.m. ET -- Foolish retirement expert Robert Brokamp speaks with the Motley Fool's own Jeff Fischer. One of the Fool's foremost authorities on options, Jeff addresses some of the concerns that many investors have about trying to use options.

Perhaps the most important point Jeff makes is that just because you decide to use options doesn't mean you have to make options trading your primary focus. As the strategies that Jeff has used as an advisor to Motley Fool Pro reveal, you can use options in conjunction with your existing stock holdings to create new opportunities for income and growth.

A simple example
For instance, one basic example of an options strategy is known as a covered call. It's especially useful when you own shares of stock that you might be willing to sell if they rose somewhat from their current price.

To use the covered call strategy, you sell call options for the shares that you own. One call option gives the person who buys it the right to purchase 100 shares of your stock, at any time before the option expires, for a fixed price known as the strike price. For instance, if you own a stock that currently trades at $30, you might sell an option allowing someone to buy those shares from you for $35, at any time between now and the middle of next month.

Depending on exactly which stocks you own and which strike price and option expiration date you choose, the amount you receive for writing an option can vary. Here are some examples:

Stock

Recent Price

Call Option/Strike

Option Price

Research In Motion (NASDAQ:RIMM)

79.80

December 90

5.80

Microsoft (NASDAQ:MSFT)

23.81

October 25

0.73

Google (NASDAQ:GOOG)

451.14

January 500

17.55

Caterpillar (NYSE:CAT)

46.64

November 55

1.54

Freeport-McMoRan (NYSE:FCX)

64.46

January 70

7.00

PotashCorp (NYSE:POT)

99.56

December 120

5.50

Wells Fargo (NYSE:WFC)

28.02

January 30

2.65

Source: CBOE. As of Aug. 5.

By dividing the recent price by the option price, you can see that selling these calls would yield you from 3% to more than 10%. Regardless of what happens, that money is yours to keep.

The risk
Always watching your back, Robert points out to Jeff that the covered call strategy does have a potential downside. If the price of your stock rises above the option's strike price, then you'll end up having to sell your shares for less than you could get in the open market. But note that the amount you get for selling the option somewhat offsets that lost opportunity cost.

The covered call strategy is just one of the interesting ways that Jeff talks about using options to enhance your retirement. While the covered call strategy can provide some additional income and gives you a firm exit strategy as you spend down your assets in retirement, there are many other strategies that can help investors of all ages achieve other goals.

To see the entire conversation between Robert and Jeff, take a look at this month's brand-new issue of Rule Your Retirement. You'll need a subscription to see the whole interview, but that's not hard -- you can get a free 30-day trial just by clicking here, and you'll get access not only to this month's issue but to all past issues, and to a wealth of other retirement resources as well. Given these tough markets, you'll definitely benefit from knowing new ways to reduce your investing risk.

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Fool contributor Dan Caplinger uses options from time to time and finds them extremely useful. He owns shares of Freeport-McMoRan. Google is a Motley Fool Rule Breakers recommendation. Microsoft is an Inside Value pick. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy gives you all the options.