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The last ten years has seen massive wealth growth in the United States. This brings up the issue of wealth planning, particularly from a tax perspective.

Got Wealth?

There is little doubt that the overall wealth of a significant percentage of Americans has grown like a weed in your garden over the last 10 years. There are a variety of reasons for this growth. Real estate appreciation has set historical records. Stock options are creating massive paper wealth, while also creating tax nightmares. Demographically, a bulge in our population, the baby boomers, are reaching retirement age. Regardless of the reason, wealth planning is becoming a big issue for many people.

New to Options? Want to trade option? This is the first step for you.

You many know many wealthy individuals make lots of money using options and you can try too.

Stock and Bond trading strategies run the gamut from the simple ‘buy and hold forever’ to the most advanced use of technical analysis. Options trading has a similar spectrum.

Options are a contract conferring the right to buy (a call option) or sell (a put option) some underlying instrument, such as a stock or bond, at a predetermined price (the strike price) on or before a preset date (the expiration date).

So-called ‘American’ options can be exercised anytime before expiration, ‘European’ options are exercised on the expiration date. Though the history of the terms may lie in geography, the association has been lost over time. American-style options are written for stocks and bonds. The European are often written on indexes.

Options officially expire on the Saturday after the third Friday of the contract’s expiration month. Few brokers are available to the average investor on Saturday and the US exchanges are closed, making the effective expiration day the prior Friday.

With some basic terminology and mechanics out of the way, on to some basic strategies.