Optionality

An option gives the right to buy (‘call’) or sell (‘put’) shares at a fixed ‘strike’ price, but only before an agreed date when the option expires. The person selling (‘writing’) the option needs to judge whether the price will rise or fall, and by how much. They hope the option will expire unused, meaning they keep the premium paid by the buyer for doing very little.

Insurers are like option writers – homeowners pay premiums to receive a payout in case of disaster. Insurers calculate premiums using similar probability-based principles to option writers. If in doubt, they overcharge; few homeowners know how to price risk and would still insure even if they did. So optionality, exploited correctly, can be quite profitable.

• Watch Tim Bennett’s video tutorial: What are options and covered warrants?

Paul Hodges: house prices could fall 50% in 'Great Unwinding'

Merryn Somerset Webb interviews Paul Hodges about deflation, the global economy's 'Great Unwinding', and how Britain's house prices could halve.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


27 January 1969: Students set up the LSE-in-exile

Students at the London School of Economics occupied the University of London Union building on this day in 1969, in protest at the erection of new security gates.