This is a good intro to something everyone analytical should know something about.
It's also worth knowing that overall, most options expire worthless, so apparently selling them is a better game than buying them. Also spreads are typically pretty large so trading them profitably requires big moves.
The built-in 'cost' of options and futures is of course 'time decay' as they are all dated and you pay more for a date further in the future.
I think they'd be very useful if you found yourself in a position with a large amount of restricted publicly-traded stock. I'd imagine you couldn't legally just lock in your equity by going short in a retail account but markets are so highly-correlated now that you probably wouldn't even need options on your particular stock to afford yourself some protection against many downside situations. Rather you might just own puts on the closest-related index. It won't be free of course but if you spent 5% of your position as "insurance" until you could sell it could prove to be worth it versus weathering a loss due to overall supply/demand forces that could take the sector and market down 50% or more without any substantial change in your own company's numbers.
It's also worth knowing that overall, most options expire worthless, so apparently selling them is a better game than buying them. Also spreads are typically pretty large so trading them profitably requires big moves.
The built-in 'cost' of options and futures is of course 'time decay' as they are all dated and you pay more for a date further in the future.
I think they'd be very useful if you found yourself in a position with a large amount of restricted publicly-traded stock. I'd imagine you couldn't legally just lock in your equity by going short in a retail account but markets are so highly-correlated now that you probably wouldn't even need options on your particular stock to afford yourself some protection against many downside situations. Rather you might just own puts on the closest-related index. It won't be free of course but if you spent 5% of your position as "insurance" until you could sell it could prove to be worth it versus weathering a loss due to overall supply/demand forces that could take the sector and market down 50% or more without any substantial change in your own company's numbers.