Options are a type of financial instrument, (also called derivatives) that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date. They can be used in an almost unlimited way in investment portfolios, let's take a look a few ways they can be used:
Options are not for everyone and understanding the risks and potential benefits are important before using options. However, for certain individuals and under certain circumstances, options can be a great tool. The more tools in your proverbial toolbelt the better.
If your only tool is a hammer, then every problem looks like a nail.
-Paul R. Rossi, CFA