Some investors think options are for investors with a high tolerance for risk. On the contrary, if used properly, options can actually reduce risk. For example, if you own a stock and are worried the price may fall, you can buy a put option on that stock. If the price does fall, your gains on the option will offset your loss on the stock.
Straddling is a strategy investors can employ if they are unsure about the market's direction. Suppose you can't decide if the market will go up or down. You can buy a call option and a put option on an index. You make money if the market rises or falls--just as long as it moves enough to make up for what you paid for the options.
The VIX is an index that measures volatility. More specifically, it measures implied volatility from options contracts. Right now, this index is at relatively low levels. Because the value of an option is positively related to volatility, this means that options are relatively cheap at the moment. If you are interested in buying options, this might be a good time to do so.
If used improperly, options can significantly increase investment risk. Make sure you know what you are doing before employing an options strategy. The Forbes Stock Market Course has a section devoted to futures and options contracts. It's a good place to start your options education.
