Investors Should Explore Their Options in Today's Bear Market

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If you are not equipped with the right tools, it can be a tough time to be an individual investor. Since the beginning of 2008, the S&P 500 stock index has fallen by over 13 percent and the Dow Jones Industrial Average by almost 13 percent. Further, a CNN/Opinion Research Corporation poll released on July 7, 2008 showed that 75 percent of Americans feel the economy is in a recession. The bear market, combined with these strong recession fears, has caused many investors to abandon the markets to protect their portfolios.1

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In bear markets, individual investors have historically headed for the sidelines, even though these can be great buying opportunities

According to David Fisher, CEO of optionsXpress Holdings, Inc., this is not necessary, as the flexibility afforded by equity options, as compared to just buying or selling stocks, can help investors stay engaged during difficult market environments.

"Equity options can be a powerful investment vehicle for any market, but they can be particularly beneficial in a bear market like this. They can help protect portfolios and provide ways to potentially profit from downturns in the market," said Fisher. "Regardless of how bearish or bullish the market may be, options can help investors achieve a wide range of objectives, while keeping predetermined levels of risk. With options as an alternative, individual investors shouldn't be satisfied just keeping their heads down in hopes that the market turns around."

optionsXpress provides an award-winning platform for investors who want to use options as part of their long-term portfolios, including educational resources aimed at helping investors understand how to use options appropriately, evaluation tools to help identify strategies for each investment objective and execution services to place trades quickly and inexpensively.

"optionsXpress has more than 290,000 customers, many of them taking advantage of our resources to utilize options during these difficult market conditions," added Fisher.

Help Protect Portfolios

The rapid growth of options over the last decade demonstrates that savvy investors already know that one of the most popular uses of equity options is portfolio protection.

"Investors who are concerned that the market may continue to fall, but don't want to sell certain holdings, can help protect those positions with options," said Fisher. "A basic approach is to buy options called 'puts,' which give investors the right to sell stock at a pre-set price within a specific time period. With put options, if the stock doesn't fall below the strike price, the investor should still own it. One can choose to look at puts as a kind of portfolio insurance, where you pay a premium and forgo some of the upside in return for protecting the downside."

Options in Bear Markets

"In bear markets, individual investors have historically headed for the sidelines, even though these can be great buying opportunities," added Fisher. "What options offer, for the cost, is the ability to stay in the market, but with less capital at risk.2 Because the price of the call option is a fraction of what it would cost to buy the stock outright, the remaining capital is free to be invested."

About optionsXpress, Inc.

optionsXpress, Inc., a pioneer in equity options and futures trading, offers an innovative suite of online brokerage services for investor education, strategy evaluation and trade execution. Barron's named optionsXpress the number one online broker for four years in a row (2003 to 2006)3 and Kiplinger's Personal Finance named it the best online broker in 2006.4

1Supporting documentation regarding statistical information available upon request.

Options involve risk and are not suitable for all investors. Please read "Characteristics and Risks of Standardized Options" or available by calling 1-888-280-8020. 2An option buyer risks the loss of 100% of the total premium paid. Unlike stock, options do not pay cash dividends or convey voting rights.

3Best Online Broker 3/6/06, 3/7/05, 3/8/04, 3/10/03, and one of Barron's Best Online Brokers 3/3/07, and based on: Trade Experience; Trade Tech; Usability; Offerings; Research; Portfolio Analysis; Customer Service/Access; Costs. Barron's is a registered trademark of Dow Jones & Company © 2008.

4"Best Online Broker" by Kiplinger's 7/06, based on: Commissions/Fees; Executions; Margin Rates; Interest on Cash; Maximum Fund Transaction Fee; Responsiveness/Broker Knowledge; Research; Web Site; Cost-Basis Data; Conduct. Kiplinger's is a trademark of The Kiplinger Washington Editors, Inc. © 2008.

Copyright © 2008 optionsXpress, Inc. All rights reserved. Member FINRA, SIPC, CBOE, ISE, BOX, ArcaEx, PHLX and NFA.

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Josh Inglis
optionsXpress, Inc.
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