What is the difference between a stock portfolio and a portfolio of options?

I've been playing this simulator Investopedia.com stock ... to learn more on commercial stocks. So far all I've learned is to buy low and sell high ... lol .... has been working well, but I want to know more. One question that have is what is a portfolio of options? And other bits of advice or information would be great too! Thanks! Ah ... and take into account that I am not too fluent in the jargon of the stock market.

A portfolio of options would be essentially a portfolio of options contracts. One option is a contractual arrangement made with another investor to buy or sell shares of stock at a specified price. For example, yesterday I bought an options contract that allows me to buy 100 shares Apple for $ 180/share at any time between now and January 2009. If the price of Apple shares up significantly to (say) $ 250 by the time the contract expires I will be able to buy $ 25,000 worth of stock for $ 18,000 (if i have 18k sitting around that can sell the contract to someone who does it for $ 7000.) Since the contract only cost me around $ 1200 to buy that is a return of almost 600%. In comparison, if I had bought Apple shares at its current price (about $ 125/share) I have had only a 100% return. This is the mouth - options allow your own significant participation in companies with relatively little money. The disadvantage is that if Apple does not close above $ 180 a contract is worthless. You can make a huge amount of money with the options but there is a very good chance that you will lose all the money you invest in the option. Are an order of magnitude more risky than stocks. Note that for many investors it makes more sense to sell the contracts to other investors. For example, say I have 100 shares of Apple. I can sell an option contract for an investor to buy my shares at a price of $ 140/share between now and September 21 for $ 210. If Apple (once again trading around $ 125 at the time) is close to or above that price, I have made about $ 17/share ($ 15 in capital gains $ 2.10 per share for the contract) a return of 13.6% in a month - not bad. If the population does not exceed $ 140 then I pocket the $ 210 and another contract to sell the shares. In short this is a good way to get revenue out of stocks, even if it pays a dividend. Will to go through your broker to buy or sell options contracts, and generally will require that you have at least some investment experience before they stop buying options.

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