Chicago, June 30: After trading options in his spare time for more than 15 years, David Kalt, a computer science engineer, put his money where his passion was.
Three years ago, Kalt and his partners launched OptionsXpress Inc., an electronic brokerage firm that caters to the individual retail investor who can execute any kind of options strategy with a click of a computer mouse.

Options are contracts that give investors the right, but not the obligation, to buy or sell stocks at a predetermined price within a set period of time.

Online options companies like OptionsXpress and thinkorswim, both based in Chicago, are mining a profitable vein.

Their popularity can be attributed to what they offer -- discount brokerage operations and learning tools to allow the do-it-yourself investor to easily navigate the complex options market through the Internet.
"Our focus was on giving the online options trader a more thorough, comprehensive platform to trade on, which includes education -- showing them how to utilize the options product as it was intended," Kalt said in an interview.

With Wall Street climbing out of a three-year bear market, more individuals are becoming interested in trading equity options, he said.

By buying "put" options that give them the right to sell stock at a given price, investors can protect themselves against a drop in the price of shares they own. With "call" options that give them the right to buy shares, they can gain from a rising stock price with a much smaller initial investment than buying shares outright.
In either case, if the market goes the wrong way, their loss is limited to the "premium," or the cost of the option.
Bureau Report