Tag Archives: trading

Why Options Trading Is More Risky and Less Risky Than Buying Shares

Options trading, while being very popular, doesn’t necessarily have the best reputation. Many people associate it with gambling (and the way many people do it definitely is) and claim that it is very risky. While it definitely can be very risky, options trading can actually be less risky than buying shares.

Options trading is when someone trades the option to buy or sell a certain number of shares (one contract is usually 100 shares) of a stock at a particular price at a particular date. If one thinks a stock is going to go up, they buy a call option and if they think it is going to go down, they buy a put option. That’s a simple explanation of a complex thing but that’s the basics.

Let’s say one was going to buy a call option. The premium that option is trading at is $2 a share. The option is for 100 shares so they pay $200 for the options contract that expires in two months. In two months, if the stock went down instead of up, they lose that $200 and the options contract expires worthless. If the stock did go up, they can buy 100 shares of the stock at the strike price of the options contract or sell the contract. That is why options is considered so risky. You can lose the entire initial investment.

Here is why options can actually be less risky than stocks though. Let’s take the same example from the paragraph above. Someone buys a call option on a stock at a $2 premium per share and pays a total of $200. The stock goes down at the expiration date, and they lose $200. Now let’s say instead that they bought 100 shares of the stock instead. If the stock went down by enough, they could actually lose a lot more money than the $200 from the option contract. Options can give investors access to a lot of shares at less downside risk.

Options are definitely not for everyone, but they can be a good addition to one’s portfolio.

AssetMark Financial Holdings, Inc. Stock Analysis

AssetMark Financial Holdings (Ticker: AMK) is a wealth management company based in the U.S. They currently manage around $55.2 billion in client funds and has around 344,000 clients. This stock has been on my watchlist for a while now, and in this article, I want to answer the question, is the stock a buy?

AssetMark is currently trading at a market cap of ~$2.6 billion. They have a p/e ratio (price/earnings per share) of 21.09 and are trading at 2 times their book value. The company currently has $235.68 million in cash and $124.36 million in debt. This gives them a current ratio (calculates how well a company can pay their debt) of 3.84 which means that the company could pay its debt 3.84 times over. Judging by its trading multiple of 21.09 times their earnings per share, this is a company that needs to be growing well for me to consider buying it, so with that in mind, let’s look at the growth.

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Analysts are expecting AssetMark to make $2.60 per share in 2024. They are also expecting the company to grow earnings per share to $2.75 in 2025. In 2023, the company earned $2.30 per share. Analysts are also expecting the company to generate $610.64 million in revenue in 2024, and they are expecting that to grow to $657.96 million in 2025. In 2023, the company generated $546.08 million. This represents 11.8% growth in 2024 and 7.70% growth in 2025. These numbers, however, are projections and there is no guarantee that AssetMark will hit these. Although, AssetMark has managed to grow both revenue and earnings every year over the last four years.

While the company is trading at a decent premium to its earnings, I do think that the company will continue to grow. I most likely will be buying shares of this stock, but this is not financial advice and is for informational purposes only so do your own research before buying the stock.

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