Brokerages demystify options trading as way to ride markets

At the end of the contract, that would give them the right to pay only $500 when everyone else is forced to buy at a higher price -giving them an instant profit. However, stocks could easily move the other way and leave investors forced to cover the difference. Options are also used on other investments, such as commodities.

David Fisher, chairman and chief executive of OptionsXpress Holdings Inc., said most of his brokerage's 280,000 customers use options on a regular basis. Further, he said the demographics of the customers participating in the options market might be surprising.

"Our average customer is over 50 years of age, and these are people that are now looking for products to round out their portfolio," he said. "They didn't have computers most of their life, online investing wasn't around, and they've really had to teach themselves how to do it."

OptionsXpress helps customers get accustomed to options by letting them practice on a virtual trading floor, which is a popular feature on the brokerage's Web site. Online and discount brokerages typically charge between $5 and $20 per options trade, and levy a fee per contract.

For the most part, the new products and education tools being rolled out by brokerages are helping to bring in new business. But, the end result is that retail investors will have more choice beyond just trading stocks -especially during periods of uncertainty where the Dow Jones industrial can spike 200 points only to end the day down 100.

Those kind of market gyrations create opportunity, Snider said.

"The proliferation of different ideas and ways for the retail investor to access the market is at times stunning," she said.