Investors consider options amid volatility

Yasmine Raso

Senior Journalist, Financial Newswire

18 August 2023

Market volatility has generated a range of new opportunities for income investors, with options also able to enhance income generation while mitigating downside risk, according to AUSIEX.

Te Okeroa, Head of Sales, Trading and Customer Relationships at the trading and asset administration service provider, said options are somewhat overlooked by financial advisers and investors in more conventional market conditions, but during ongoing volatility they act as another source of income with varying upside potential.

“Options offer sophisticated investors more than the ability to diversify by leveraging different underlying assets,” he said.

“For example, writing covered call options can potentially provide income from the premiums received from writing these contracts.”

Okeroa said investors should make “prudent usage” of options as speculation continues about market conditions and a volatile earnings season, which could present benefits of increasing premiums and lowering breakeven point on underlying investments.

He said the premium can help the strategy perform stronger in volatile markets and generate income for investors.

“This adds to the benefits of options, potentially enhancing their total returns while reducing risks.”