New York, NY securities attorney Jenice L. Malecki talks about what are options and how do they work. She explains that options are contracts between two investors, in which they agree to buy or sell a position in a stock at a specified price at a future date. Each option has an expiration date, defining the time frame of the agreement. Many investors assume that covered call writing is a safe strategy, using it primarily to collect premiums. Some also place puts and calls around concentrated positions to mitigate the risk of significant market movements.

However, she emphasizes that options inherently involve risk. They are essentially bets on the direction of the stock market and are not inherently safe. Even covered calls carry potential downsides: a long-held position with accumulated gains could be lost, or an investor may be forced to repurchase shares if they lack the capital, potentially resulting in substantial losses. She stresses that investors must fully understand the embedded risks in any options transaction before engaging in these strategies.