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What's your opinion on options?

To be perfectly candid with you, I'm not an options expert, nor am I licensed to give advice on them. But let me give you my opinion on options. Before you consider buying options, I strongly advise you to look at the premiums. Options command high premiums, and those premiums can really eat into your profits.

“Put” options are designed for investors who want to hedge. They act as insurance for your portfolio. But you can pay hefty premiums for puts, and sometimes the premium doesn't allow the insurance to kick in until the market falls 10% or more. Let's say you bought a put option to protect yourself against a drop in the stock market, and sure enough, the market falls 10%. But if you paid a 10% premium, the option would still be useless.

If you want to speculate and buy options, you’ll pay a premium on that side, too. You might be betting that the market is going to go higher. Even if the market moves 10% higher, you still might not make a lot of money simply because of the premium you paid on the option.

It is possible to write call options on the Buy List stocks and collect income to supplement your dividend income. Writing call options is the most conservative way to boost your income beyond dividends. But it's important to remember that if the stocks rally, the options will be called. If you're ever going to experiment with options, I think it's best to experiment by writing call options on good companies.

Like I said, I'm not an options expert, nor will I ever recommend options in the newsletter. If you'd like to learn more about options, I recommend the Chicago Board Options Exchange .

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