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Stock options can give you an extra source of income to keep you from spending money you’re not going to use.
They allow you to buy shares of a company at a discounted price and sell them at a profit, with no need to pay any upfront fees.
To get started, we talked to a few experts on the subject.1.
Michael Cimber, author of How to Be More Productive in Your Career: A Practical Guide to Getting the Most Out of Your WorkLife article Michael Cimbber, the author of the How to be More Productively in Your Life book, told Engadg it can be challenging to find the right tools to help you make better decisions.
But when you get the right tool, he said, you’ll be more likely to be able to make smarter decisions.
“Stock options can be very useful to people looking to invest more in their business and to have a greater return,” he told Engag.
“A stock option is a way to buy a stock at a lower price, and when you sell it later, you can then take your profit with you.
So it can really help you in many ways.”
Cimber added that you should consider using options if you’re planning to work in finance, a key area for many investors.
“When you’re in a finance position, you have to make a decision on how much you’re going to invest,” he said.
“So when you think about a stock, you think, I need to find some way to take advantage of this stock or that stock, and so I can take advantage when I leave this company.”2.
Jonathan Tannenbaum, CEO of Wealthfront and a cofounder of Tannens Financial Investments, told us it can also be difficult to find a great option.
“If you’re starting out in finance and you don’t have access to a financial advisor, there’s a big chance that you’ll end up in a situation where you’re just wasting money and you’re probably going to lose your career,” he explained.
“It’s going to be very hard to find options that are a good fit for you.”
Tannen said that a few different types of options have been around for a while, and that the most popular ones tend to be long-term options.
“For example, if you want to buy an option on a bank stock and then sell it in a year, it’s called a short-term option,” he explains.
“But if you put that option on an S&P 500 stock and sell it two years later, that’s a long-lived option.”3.
Tim Wainwright, CEO and cofounder at Investopedia, said you can also buy a short interest in a company with a fixed rate and sell the interest in two years.
“These options work in reverse,” he tells Engad.
“You can make a profit on the stock and get paid a profit off the interest.”
If you want a stock to be cheaper to buy, or you want an option to be more appealing to a potential investor, consider investing in a short or long-dated stock.
“Long-dated options work well for the types of companies you’re considering, like banks or pension funds,” he says.
“They have a high level of leverage, which means they’re a little bit less risky, but they have a lot of liquidity.”4.
Robert Kagan, author and managing partner at Kagan & Associates, said there are different types and lengths of options you can choose.
“Some are very attractive because they have great upside,” he adds.
“Others are good for long-running businesses, like the health insurance companies that you have in your company.”
Kagan said you should look at options with three different periods of time in the future, or a couple of years or less.
“I like a couple options that have a two-year window in them, and a longer option that has a six-month window in it,” he added.
If you have a long investment horizon, look at long- and short-dated companies, or options with fixed interest rates.
“The longer-term types are generally better value for money,” he states.
“If you are looking to go long, long-held options can help you save money.”5.
John Gough, cofounder and co-CEO of S&s Advisors, told GQ, “The best long-to-short options are those with fixed-rate and short interest rates.”
He says long-standing companies that have good financial standing, like healthcare companies, can get a higher return than short-lived ones.
“Companies that have an excellent financial future and are actively trading are a better investment than a company that is just holding stock,” he wrote.
“And companies that