Option Contracts Offer Tax Advantages, But Beware of Risks

In uncertain markets, sometimes leveraging your existing holdings can put you on a path to greater returns.

A man's hand holds up a smartphone, which shows a stock trading graph.
(Image credit: Getty Images)

When it comes to investing in the stock market, many of us are somewhat spoiled. This past decade saw the best performance in market history. For some, fantastic returns were the norm, but they’re now finding out that such returns aren’t guaranteed, and the incredible run we enjoyed appears to be over.

To the person counting on significant gains from their investments in order to fund their lifestyle or retirement, the last couple of years have been an unpleasant surprise. Nevertheless, there are still opportunities to improve our potential returns. One such opportunity in flat or downward-trending markets is the call option.

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Samuel V. Gaeta, CFP®
Principal, Director of Financial Planning, Defined Financial Planning

As Principal and Director of Financial Planning, Sam Gaeta helps clients identify financial goals and make plan recommendations using the five domains of financial planning — Cash Flow, Investments, Insurance, Taxes and Estate Planning. He is responsible for prioritizing clients' financial objectives and effectively implementing their investment plans and actively monitors the ever-changing nature of clients' financial and investment plans.