Han, Ki C.; Heinemann, Alexis
June 2007
Journal of Personal Finance;2007, Vol. 6 Issue 2/3, p108
Academic Journal
As options trading has drawn attention from investors as a viable choice for investment, numerous books have been written, many different software programs have been developed, and quite a few websites have been designed to educate and attract potential investors to options. Unfortunately, these valuable information vehicles have developed a misconception among ordinary investors by emphasizing the profit opportunity without fully explaining the downside risk. Using the call options on the Dow Jones Industrial Average stocks, this study investigates whether so-called easy strategies, such as bull call spreads, work for ordinary investors. The results show that a bull call spread is hardly profitable for ordinary investors, confirming that options trading is truly risky.


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