22  •   The Intelligent Option Investor
The beautiful thing about this flexibility is that an intelligent option in-
vestor can pick and choose what exposure he or she wants to gain or accept in 
order to tailor his or her risk-return profile to an underlying stock. By tailoring 
your risk-return profile, you can increase growth, boost income, and insure 
your portfolio from downside shocks. Let’s take a look at a few examples.
Options Give Investors Many Choices
Buying a Call for Growth
-
50
100
150
200
BE = $55
GREEN
Above an investor is bullish on the prospects of the stock and is using a call op-
tion to gain exposure to a stock’s upside potential above $50 per share. Rather 
than accepting exposure to the stock’s entire downside potential (maximum 
of a $50 loss) as he or she would have by buying the stock outright, the call-
option investor would pay an upfront premium of, in this case, $5.
Selling a Put for Income
50
100
150
200
-
BE = $45
RED