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Options riches? Not easy.


One favorite question during the Your Money Helpline yesterday was from a nurse.
1195422853575736333ArtFavor_Money_Bag_Icon.svg.thumb.pngWho had gone to a seminar.

To learn how to trade options and invest in commodities.

She wanted to put $10,000 into this effort.

She wanted to earn $5,000 to $10,000 more.

And she thought she could.

(She was also considering paying $2,000 to a "coach" to guide her in this effort.)

Let me say it directly: Making 100 percent on your money isn't easy. Especially with investments you don't understand.

"Options trading is extremely speculative. Even seasoned professionals don't do that. You're going to lose your money," Certified Financial Planner Mike Lynch of Money Matters of America in Plantation told her.

Clear enough?

More questions and answers below. Look at our live chat, too.

Categories: Your Money (247)
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Comments

I hate that people such as your nurse get trapped by those who hype options as a get rich quick scheme.

I don't like your CFP's response either.

The truth is that options are risk-reducing investment tools, but most people learn to use options as instruments with which to gamble.

If you LEARN and UNDERSTAND how options work, you can invest in the stock market with less risk. LESS RISK.

That means a reduced chance of losing money and it also means any losses are smaller (than without using options).

Options are a fascinating tool, if used judiciously.


Buying options can be risky but selling options on stock you own can get you an extra 10% per year return.


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About the author
You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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