1. Limited Risk while unlimited potential profit

          One of the biggest advantages option trading has over outright stock trading and others is to be able to take a view on market direction with limited risk while at the same time having unlimited potential profit. This is because option buyers have the right, not the obligation, to exercise the contract for the underlying at the exercise price. If the price is not right at the time of expiration, the buyer will forfeit his/her right and simply let the contract expire worthless.

2. Using options to enhance the return on my stock portfolio with “Covered Call”

          The covered call is a strategy in which an investor writes a call option contract while at the same time owning an equivalent number of shares of the underlying stock. If this stock is purchased simultaneously with writing the call contract, the strategy is commonly referred to as a "buy-write." If the shares are already held from a previous purchase, it is commonly referred to an "overwrite." In either case, the stock is generally held in the same brokerage account from which the investor writes the call, and fully collateralizes, or "covers," the obligation conveyed by writing a call option contract. This strategy is the most basic and most widely used strategy combining the flexibility of listed options with stock ownership

Call Options: (80 days left)
          Strike price = 30
          Premium = 1.10 Baht

To do the covered call
Sell 10 Call and receive 2,200 Baht (10 x 1.1 x 200)
On the expiration day,
          - if stock price < 30 hold on 2,000 shares, plus 2,200 Baht of premium
          - if stock price > 30 sell the stock at 30 Baht, plus 2,200 Baht of premium, equivalent to sell at 31.10 Baht

Equivalent interest = 19.3 % [1.1 x 26 x (365/80)]

3. Using options for portfolio insurance with “Protective Put”

          A protective put is like a collision insurance policy on an automobile. A car is valuable, and its owner suffers if it is damaged in an accident. To protect against this potential for loss, people buy insurance, fully expecting to “lose” all the money they pay for it. A person should not feel discouraged if an accident-free year goes by without filling a claim with insurance company.

          When you select an insurance policy, you can choose how much protection you want. If you want to coverage for all expense of collision damage, the insurance is expensive. However, if you are willing to assume the risk of the first 20,000 Baht in damage and just buy insurance against a major loss, the insurance premium is much lower. Larger deductibles mean a lower premium, and this is also true in the options market.

Example

An investor’s portfolio consists of 2,000 shares whose price = 26 Baht per share
Existing portfolio value = 52,000 Baht (2,000 x 26)

Put Options: (80 days left)
          Strike price = 26
          Premium = 1.00 Baht

To do the protective put
Buy 10 Put; pay 2,000 Baht (10 x 1.0 x 200)
On the expiration day,
          - if stock price < 26 profit from selling stock at 26 Baht.
          - if stock price > 26 hold stock; do nothing with option contracts and let them expire worthless.