Definition of option mutualfund

mutual fund that either buys or sells options in order to increase the value of fund shares. option mutual funds may be either conservative or aggressive. For instance, a conservative fund may buy stocks and increase shareholders' income through the premium earned by selling put and call options on the stocks in the fund's portfolio. This kind of fund would be called an option income fund. At the opposite extreme, an aggressive option growth fund may buy puts and calls in stocks that the fund manager thinks are about to fall or rise sharply; if the fund manager is right, large profits can be earned through exercise of the options. The leverage that options provide makes it possible to multiply the return on invested funds many times over.