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When we talk about investing, the first thing that comes to mind for most people are...

When we talk about investing, the first thing that comes to mind for most people are stocks and bonds. However, their are many investing vehicles available. If you were told that you could select only one investment vehicle, what would it be and why?

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Answer #1

My Investment vehicle will be Derivative Options.

There are options available on market Indices. Options help you to have big exposures by paying very less premiums. Say you predicted that S&P500 will rise in 2 months. So if you buy ATM call option on the Index and when the S&P500 really rises, then you will earn a great percentage. In case of options you gain big exposures by paying small premiums. So the ROI is huge. Say for 1 Contract the premium is $2 and if the Index moves up by $20, the option moves from $2 to $15. So by investing $2 you earned $15.

Percentage of Profit = Profit / Initial Investment

Profit = Selling Price - Initial Investment

= $15 - $2

=$13

Initial Investment = $2

Percentage of Profit = 13 / 2

= 6.5 Times

So this kind of profit in short term is not possible in debt or stocks.

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