background image background image background image

Options Talk - Episode 20 - unlocking potential with long-term options

Options 10 minutes to read
KOHO portrait
Koen Hoorelbeke

Options Strategist

Summary:  In Episode 20 of 'Saxo Options Talk,' Koen Hoorelbeke and Peter Siks delve into the strategic advantages and considerations of using long-term options, particularly call options, in trading and investing. This episode is a must-listen for traders and investors looking to leverage capital efficiency and manage risk effectively.


Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks.

Introducing episode 20 - unlocking potential with long-term options

"Episode 20 - unlocking potential with long-term options" provides an in-depth look at the benefits and drawbacks of long-term options. Koen and Peter discuss how these financial instruments can be utilized to maximize returns while managing risk, offering practical insights for both novice and experienced traders.


You can listen here on the podcast-site if you don't see the player above
 

Understanding long-term options

  • Buying call options: Provides the right to buy an underlying asset at a certain price within a specified period.
  • Capital efficiency: Buying a call option is more capital efficient than buying the underlying stock outright.
  • Example: If a stock is at $100, buying a 90 call with one year to expiry might cost $11.50, which includes $10 intrinsic value and $1.50 time value.

Risk management and strategic uses

  • Lower risk: Buying call options can lower risk by reducing the amount of capital at stake compared to owning the stock.
  • Strategic uses:
    • Converting stock holdings to call options: Lock in gains while maintaining exposure.
    • Speculating on stock price increases: Use call options to speculate with limited risk.

Benefits

  • Leverage: Allows for potential high returns with a smaller initial investment.
  • Risk limitation: Maximum loss is limited to the premium paid for the call options.
  • Diversification: Frees up capital for other investments, enhancing portfolio diversification.

Drawbacks

  • Time decay: Options lose value over time, particularly as they approach expiration.
  • No dividends: Call option holders do not receive dividends from the underlying stock.
  • Limited lifespan: Options have an expiration date, after which they become worthless if not exercised or sold.

Why listen to episode 20?

For traders and investors looking to deepen their understanding of long-term options, Episode 20 of 'Saxo Options Talk' is essential. Packed with practical advice and expert insights, this episode will help you leverage long-term options to enhance your trading and investing strategies.

Subscribe and stay ahead

Ensure you don't miss this insightful episode by subscribing to 'Saxo Options Talk' on Podbean, or on Spotify. Keep yourself updated with the latest strategies and discussions in options trading.

Join the discussion

After tuning in, join me on my X profile or my Threads profile to share your thoughts and insights on the episode. It's an excellent platform for engaging with fellow traders and enhancing our collective understanding of options strategies.

Your questions, our answers

We're eager to hear from you! Send your options-related questions to optionquestions@saxobank.com. Selected questions will be addressed in future episodes, providing customized advice and insights.

Conclusion:

"Episode 20 - unlocking potential with long-term options" equips traders with the knowledge to make strategic decisions when using long-term call options. Koen and Peter’s expert insights and practical tips provide a comprehensive guide to understanding the benefits and risks of long-term options. Tune in to transform your trading strategies and maximize your investment potential with this powerful financial tool.

Previous episodes of the "Saxo Options Talk" podcast
Previous "Investing with options" articles
Previous "What are your options" articles
Other related articles
Why options strategies belong in every trader's toolbox
Understanding and calculating the expected move of a stock ETF index 
Understanding Delta - a key guide for Investors and Traders

Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks. In Saxo Bank's Terms of Use you will find more information on this in the Important Information Options, Futures, Margin and Deficit Procedure. You can also consult the Essential Information Document of the option you want to invest in on Saxo Bank's website. 

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • 350x200 peter

    Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • 350x200 althea

    Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • 350x200 peter

    Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • 350x200 charu (1)

    FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • 350x200 ole

    Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.