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Boosting Yield While Lowering Risk
Options are important for investors to consider as a risk management tool. That is especially important in a market when risk increases. There are a number of indicators that risks are rising in the current market environment. One that investors should be on alert for is a value trap.
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A value trap develops when a fundamental measure of a company becomes attractive while the underlying fundamentals of the business operation are unattractive. For example, investors may find a yield of more than 8% attractive. That is the value of the value trap.
But the trap is sprung when the underlying operations lead to a cut in the payout or the operations remain relatively stable and end up being unable to support an expected increase in the payout. This is the kind of market where value traps can appear more often.
We consider how one industry could be creating value traps. We also consider how good news for an industry could be bad news for an investment.
We also share a strategy that creates income from a high yielding opportunity but limits the risk and could be a useful strategy as prices fall or continue to fall.
All of the details, as well as a specific trade are available here.
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Not sure the best way to get started? Follow these simple steps to hit the ground running.
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