More and more investors are using "options" strategies to try to boost their profits. We get a lot more questions about options than we used to, so let's take a few moments to talk about what they are, how they work and if you should use them.

Here is a brief overview of options, along with some cautions and some key speculative and conservative strategies you can use with "puts" and "calls." Put options and call options are a more aggressive way to make money from the stock market.

Call Options 101

A call option entitles you (the buyer of the option) to buy 100 shares of a particular stock, at a pre-agreed price, for a specific amount of time—no matter how high the stock's price rises. When you buy a call option, you're betting that the price of the stock will go up and that it will do so during the time that you own the call.

Let's walk through an example. Say you believe that Widget is a great buy for the next few months, but you don't have $3,000 to buy 100 shares of Widget. You do, however, have $250 and are willing to risk it to buy a call. The call gives you the right to buy 100 shares of Widget until the call's expiration date (usually several months from when you buy it), at the pre-agreed ("strike" price) price of $30 per share.

If Widget jumps to, say, $35 per share before your call's expiration date, you have two choices. You can 1) "exercise" your call and buy the 100 shares at $30 per share (even though the stock is now trading at $35/share), or 2) sell out the call itself, which would rise in value with the stock. The call, on or near expiration, with Widget trading at $35/share would be worth $500 (the difference between the strike price—30—and the current market price—$35!)

In this example, you've doubled your money. Does it really happen? Sure! But, buying calls isn't easy. You need to be realistic about the potential downside. In this example, if Widget had dropped below $30 by your call's expiration date, you would have lost your entire $250 investment—100% of what you invested.

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