A stock OPTION is a contract that gives you the right—but not the obligation—to buy or sell shares of an underlying stock before a certain date, called an EXPIRATION DATE.

THE BENEFITS OF AN OPTION

THE TWO BASIC OPTIONS

CALL – Pick UP and call

Call options are for when you’re expecting a stock’s value to go UP. A call is the right to buy a stock at a predetermined price (the strike price) on or before the expiration date.

Useful for:
• Profiting from a stock’s gain without paying full price for the stock

• Limiting your downside risk in your portfolio equal to the income received from the option

PUT – Put down the phone

Put options are for when you’re expecting a stock’s value to go DOWN. A put is the right to sell a stock at a predetermined price (the strike price) on or before the expiration date.

Useful for:
• Profiting when a stock loses value

• Protecting your portfolio against losses in an existing position

Example options trade

THE BASIC CALL – CONDITIONS:

• You’re bullish on stock XYZ
• XYZ is currently trading at 50, but you think it’ll go to 60 by December
• You want a small cash outlay versus buying the stock
• You want leveraged profits with limited downside risk

Maximum Risk: Premium Paid
Upside: Unlimited
Breakeven Price = Long Call Strike Price + Premium Paid

XYZ – December 50 Call Option
Premium: $4.50
1 Contract (right to buy 100 shares of XYZ at $50/each)=
$450 Total Investment

FACTS ABOUT OPTIONS

• Options are a derivative, which means you’re not trading the asset itself, but simply a contract based on the asset. Since you do not have to buy the underlying asset, options have a lower upfront cost than stocks.
• The per-share price of an options contract is called the premium. One option contract grants the right to but or sell 100 shares.

THE BASIC PUT – CONDITIONS:

• You’re bearish on stock ZYX
• ZYX is currently trading at 40, but you think it’ll go to 30 by December
• You want to short the stock, but would prefer a lower risk if the trade goes against you

Maximum Risk: Premium Paid
Upside: Unlimited
Breakeven Price = Long PutStock Price – Premium Paid

ZYX – December 40 Put Option
Premium: $3.50
1 Contract (right to sell 100 shares of ZYX at $40/each)=
$300 Total Investment

• Trading an option requires two parties, a BUYER and a SELLER (or WRITER). The Buyer holds the option to exercise the contract and can do so before the expiration date, while the Seller holds the obligation to fulfill the contract if it is exercised.
• Expiration dates are listed in the form of month and year (e.g. March 2020), and usually expire on the third Friday of that month.

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Term Life Insurance

Term life insurance lasts for a set number of years before expiring. If you die before the term is up, a set amount of money known as the death benefit, is paid to your designated beneficiary. Term life insurance policies are considered to be more affordable than other life insurance policies.

Whole life insurance

Whole life insurance is considered permanent life insurance coverage since it does not expire. It has a death benefit but also a cash value, which is tax deferred savings account that is included with the policy. The cash value accrues interest at a predetermined fixed rate. Whole life lasts as long as you pay the premiums.

Universal Life Insurance

Universal life insurance has a cash value, just like a whole life insurance policy. Your premiums go towards both the cash value and the death benefit. You can also adjust the death benefit within the limits outlined in you policy.

Variable Life insurance

Variable life insurance is similar to whole life insurance in that they both have a cash value, but the functions of the cash values are quite different. A variable life insurance cash value, is geared more to investing. The money paid into the goes into a series of mutual fund-like sub accounts the you can add growth.

Variable universal life insurance

Variable universal life insurance is a combination of a variable life insurance policy and a universal policy. Variable Universal life policies take the best of the two policies: adjustable premium and adjustable death benefit while investing the cash value.

Long Term Care

Long term care insurance is designed to cover long -term services and supports, including personal and custodial care in a home setting, community organization or other facility. Long-Term care insurance reimburse the policy holder a daily amount for services to assist them with daily living activities.

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What Plans are available for Self Employed?

• Solo 401(k)
• Simplified Employee Pension (SEP IRA)
• Savings Incentive Match Plan for Employees (SIMPLE IRA)
• Profit Sharing

Features of the Solo 401(k)

• Best for: Self-employed individuals and partnerships without full-time employees (other than a spouse or business partner)
• Employee Contributions: When contributing as the employee, the contribution limit for tax year 2019 is up to $19,000 in elective deferrals, or $25,000 for ages 50 and up.
• Employer Contributions: For tax year 2019 is 25% of compensation. Total contributions (employee + employer) cannot exceed $56,000 below age 50 and $62,000 for ages 50 and up.

Features of the Profit Sharing Plan

• Best For: Self-employed individuals and small business owners with up to 100 employees
• Employee Contribution Limits: Not applicable
• Employer Contribution Limits: Lesser of 25% of compensation or $56,000 for 2019

Features of the Simplified Employee Pension (SEP IRA)

• Best For: Self- employed individuals and small business owners
• Employee Contributions: Not applicable
• Employer Contributions: Lesser of 25% of compensation or $56,000 for 2019 Employer is not locked into making contributions each year and can decide whether and how much to contribute to employees accounts (note: if employers do contribute, must contribute for all participants who are eligible for pla)

Features of the Savings Incentive Match Plan for Employees (SIMPLE IRA)

• Best For: Small business owners with up to 100 employees
• Employee Contribution Limits: Up to $13,000 in salary deferrals ($16,000 for those 50+) for 2019
• Employer Contribution Limits: Match employee contributions up to 3% (can reduce to 1% in any two out of five years) OR contribute 2% of employee’s compensation (even if employee is not making deferral contributions)

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