Smart Money Podcast: Options Trading, Short Sales and Derivatives

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Explore the risks and rewards of options trading, short selling and margin trading in this nerdy derivatives deep dive.

Hosts Sean Pyles and Andy Rosen explain the concept behind derivatives trading before investing Nerd Sam Taube joins the show for a closer look at the specific types of derivatives. Sam explains the speculative and protective reasons for derivatives trading — and the average retail trader’s chances of finding success.

Sam also delves into put and call options and the risks involved; short sales and the role that shorting plays in financial markets; and margin trading, including what happens when it goes right or wrong for an individual.

Check out this episode on your favorite podcast platform, including:

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NerdWallet stories related to this episode:

Active vs. Passive Investing: Which is Better?

Smart Money Podcast: Day Trading Highs and Lows, a Guide to Calculating Risk

What Is a Margin Call? Definition and How to Handle One

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Sometimes you just want a scoop of ice cream, just plain vanilla ice cream, kind of like an index fund, tasty and safe. But sometimes you want to go beyond plain vanilla. You want rocky road with chocolate sauce and whipped cream. You want to do it the way you want to do it. And that, my friends, is what we mean when we talk about investing in options, shorts, derivatives and contracts.

Sam Taube: The risk and reward tends to be a lot higher than with just stock ownership. Because generally with derivatives trading, you're either going to get a big payout — double your money or something like that — or you're going to lose everything you invested in a particular contract.

Sean Pyles: Welcome to NerdWallet’s Smart Money podcast. I'm Sean Pyles.

Andy Rosen: And I'm Andy Rosen.

Sean Pyles: Welcome to episode three of our nerdy deep dive into next level investing.

Andy Rosen: Sean, I suddenly have a craving for pistachio ice cream with gummy bears on top.

Sean Pyles: Whatever suits you and makes you happy, I'm not going to stop you, but that sounds disgusting. And you know what? Maybe go get some options contracts while you're at it.

Andy Rosen: Well, how about we first tell the good people what an options contract is? We all know what a gummy bear is, right?

Sean Pyles: That's fair. OK, and I know today we're going to be talking about some of the more esoteric types of investments. Is that a good word to describe it?

Andy Rosen: Did you get that in a 12th grade English class?

Sean Pyles: Yes, I did. We're going to be talking about some more esoteric ways to invest your money.

Andy Rosen: I'm sure most listeners have heard of some of these investing methods: options, short selling, derivatives. So today we're going to explore all of these and get some insight on how they can help or hurt your portfolio. You ever dabble in these, Sean?

Sean Pyles: Not even in my most stressful nightmares, Andy. What about you?

Andy Rosen: Not really. Some of these strategies require a huge amount of attention to detail. I mean, all investing requires attention to detail. But with these, even a split second can sometimes make a difference. So as I said last time, I have a job to do during the day, so I stick to more straightforward, long-term strategies and focus on writing about how these concepts work.

Sean Pyles: All right. Well, should we go ahead and define these?

Andy Rosen: No, I've got a better idea. How about we bring in another Nerd?

Sean Pyles: OK, well we are nerding out on next level investments. We need more Nerds.

Andy Rosen: We are, and we do. I asked our colleague Sam Taube if he could come on and give us a sort of tutorial on some of these investing options. And Sean, he said yes.

Sean Pyles: That guy, Sam. He's so generous.

Andy Rosen: Oh, what a guy.

Sean Pyles: Well, before we hear from Sam, a reminder: We Nerds are not financial or investment advisors. We will not tell you what to do with your money. Everything covered in this episode and this series is to provide you, our dear listener, with the knowledge to make informed decisions with your own money.

And listener, we also want to hear what you think, too, to share your thoughts around next level investing with us. Leave us a voicemail or text the Nerd hotline at 901-730-6373. That's 901-730-N-E-R-D. Or email a voice memo to [email protected]. Andy, take it away.

Andy Rosen: Sam Taube, welcome back to Smart Money.

Sam Taube: Thank you. It's great to be back.

Andy Rosen: All right, today we're going to talk about ways that stocks can be kind of adapted and moved into different kinds of investment products. So can you just get really basic with me: What's a derivative? That probably is an overarching term that we're going to want to have people understand in order to really get this.

Sam Taube: So derivatives are generally a contract that lets you bet on something that's going to happen in the future. And they typically take the form of an agreement that one party will purchase something from another, and that something could be a stock or a commodity or whatever else for a specific price at some point in the future.

And the two big kinds of derivatives that most people are going to be familiar with are options, which are an agreement to buy or sell a stock at a set price on or before some date. And then the other ones are futures, which are pretty similar. They're agreements to buy or sell a commodity at a set price on a set date in the future.

Andy Rosen: So you can actually trade these options, you can trade futures, and the underlying thing might be a contract that has something to do with a stock or as you said, a commodity. But in the end, the actual contract itself — the option, the future, the agreement, the derivative — is its own thing that can be traded and has its external value. Is that right?

Sam Taube: Exactly. Yeah, it's a bet on a bet. And the reason why derivatives are called derivatives is because their value is derived from some other underlying thing, whether that's a stock or a commodity or whatever else.

Andy Rosen: So if you're thinking about the values of these things and how you might trade them, how are they different from stocks or other investments that people would be more familiar with?

Sam Taube: For one thing, they're generally a lot more volatile. The risk and reward tends to be a lot higher than with just stock ownership, because generally with derivatives trading, you're either going to get a big payout — double your money or something like that — or you're going to lose everything you invested in a particular contract. Oftentimes with stock trading, you see people selling for a 10% gain or a 10% loss, but the numbers with derivatives tend to be bigger.

And the other difference between derivatives trading and buy-and-hold stock investing is the time frame. You can hold stocks and bonds for decades, but derivatives contracts generally have an expiration date that's in the next, I don't know, three or six months sometimes. So they're very much meant for short-term trading.

Andy Rosen: When we were talking earlier, you made a really interesting point about the functions these things can have. They can obviously ratchet up your risk, but they can also be ways, especially for people who have very complicated portfolios, to create some hedges against what they hope won't happen. So how might you use these kinds of derivatives in a more conservative way, potentially?

Sam Taube: There's two major reasons people trade derivatives and the more well-known one I would say is just speculation, making bigger bets with less money than you can make by directly trading stocks and commodities.

But as you said, there is also a protective use of derivatives, a hedging use of derivatives. Say you own a stock and you want to protect yourself against some of the downside that you might be facing on that stock, you can make a small derivatives investment, like for example buying a put option on that stock. And so that way you still own the underlying stock, but you have something that will go up in value if the stock goes down. So it can be gambling, but it can also be risk management.

Andy Rosen: Put option, again, will you just remind people what that is in just a couple words? A put option is a —

Sam Taube: So, a put option is a contract that gives you the right but not the obligation to sell a stock at a set price on or before some date in the future. And generally a put option will go up in value if the market price of the stock goes below that set price that you have the right to sell at because it kind of gives you the ability to sell for a higher price than the market price, if that happens.

Andy Rosen: While we've got our hands dirty, can you tell us what a call option is? That's the other big kind of option that people will probably see.

Sam Taube: A call is the same thing except the transaction in question is buying rather than selling. A call option gives you the right but not the obligation to buy a particular stock at a set price on or before some expiration date in the future. If the market price goes above the strike price, which is what that set price is called, then that gives you the right to buy the stock for less than it's worth, which is a very valuable thing if the stock goes up. So a put goes up if the underlying stock goes down, a call goes up if the underlying stock goes up.

Andy Rosen: That's a really helpful breakdown. Now that we've kind of laid out the baseline of what exactly these things are, I think it would really help to ground this idea in a somewhat real world example. I think you had one that's kind of hypothetical, but gives us a little bit of a sense of what might happen in a transaction like this.

Sam Taube: So I'm going to run through a hypothetical example involving Apple, which there's no particular reason that I'm using Apple besides the fact that it's one of the biggest and best-known publicly traded companies. But let's say that Apple, which is trading around about $180 at the time of recording, let's say that you think that they're about to announce some new secret product that's going to be really big and get people really excited, and you think their stock price is going to go up to $220 because of this. One way to do this would be to buy Apple stock, but that could involve a really big outlay of money because $180 a share is a lot of money.

So another way that you could bet on this release that you think is coming up is by buying some call options. Sometime before this supposed release event, you could buy a call option that gives you the right to buy Apple shares for $190, which is a little bit higher than the market price of $180. And because the strike price of that call option is higher than the market price, there's a good chance the call option would be pretty cheap. It might cost you, I don't know, somewhere around the area of $2.50 per share because the strike price is higher than the market price.

Now suppose that a few weeks go by, and you're right about Apple's big upcoming release; it happens and people go wild for it and Apple shares go up to $220 before the option expires. You have two options as to how you could cash in on this. You could exercise the option, which means that you would buy Apple shares for $190 and then you could immediately turn around and resell them for $220. That's about a 14% profit margin.

But as we talked about, these contracts also have their own market value independent of the underlying stock. And the other thing you could do is you could resell the call option to another option trader. And at this point, Apple is worth $220, which is more than your strike price of $190. And that means that the call would be worth a lot more, and we're talking like a lot more, like it could go up to the area of somewhere around $30, based on the typical formulas for valuing options. So if you bought the call for $2.50 a share and sold it for $30 a share, that's like a profit of more than 1,000%.

If you're wrong and the price goes down and your option is worthless, then you can just abandon it. And in that case, you just lose the $2.50 per share you paid.

Andy Rosen: What you've just described, Sam, sounds like a pretty low-risk deal, right? In real life generally people are playing with higher dollar amounts obviously. And I guess I'd love to know kind of, how do people get themselves in deep water with these?

Sam Taube: In terms of what can go wrong, there's a couple different things. If you are buying call options, then the worst case scenario is you walk away and you lose the relatively small amount of money you paid for the option, and that's not such a big deal in isolation. If you do it a lot, then those losses can add up and that can really be a drag on your returns.

Andy Rosen: Right. We don't want to get gambling and stock market investing too closely confused, but it's like making a bet on a really bad team to win against a really good team. If you're right, you get a lot of money, but you're not super likely to be right.

Sam Taube: Exactly. And that's why it doesn't cost as much as going out and buying the stock.

Andy Rosen: Got it. So yeah, that's what we were just about to go into, is maybe you could talk a little bit more about why it costs less than the stock itself?

Sam Taube: The market is what decides what a particular options contract is worth, but you can also calculate the theoretical value of it. And the market generally follows the values that are determined by an equation called the Black-Scholes model, which is one of the most accurate and popular ways of valuing an option. And you can find Black-Scholes calculators online. And in that Apple example, I plugged the strike price and the market price and the future price and all that other information into one of these calculators.

Andy Rosen: I would love it if you could tell us a little bit more about what the downsides are, especially for people who are writing options.

Sam Taube: So to start with the fundamentals of how these transactions work, you alluded to the fact that both puts and calls have a buyer and a seller. And the seller of an option, the person who originates the option and sells it to a buyer, is also called the writer of the option. And I'm kind of going to use the term “writing an option” because it can get a little confusing to talk about buying and selling because you can buy an option and then resell it. But that's different than selling the option at its origin.

Now the person who writes a call option has the obligation to sell a stock to the person who buys the call option at the strike price, if the person who buys the call option exercises it before the expiration date. So if the person fulfills the contract — because when you buy an option, you don't necessarily have to go through with the contract and buy the stock — you can just walk away, in which case you just forfeit what you paid for the option.

Andy Rosen: Right. Otherwise it's not really an option, is it?

Sam Taube: Right, exactly. That's where the term comes from. But if you're on the writing side of the option, if you're on the other side of the trade, then you are at the mercy of whoever buys the option. And if the option ends up becoming profitable and the buyer exercises it, then you are obligated to sell them the shares at the strike price, which might not be a favorable price in terms of where the market price of the stock is.

So if you write an option and it goes against you, things can actually get a lot worse than just losing what you paid for the contract. If you write a call, which again is the kind of option that goes up if the stock goes up, if you write a call on a stock you don't own and then the market price goes up and the buyer exercises it, then you will be contractually forced to buy the stock at the market price and then sell it to the buyer for the strike price, which is going to be lower in this case. And keep in mind that in the real world, these contracts control 100 shares. So you can find yourself in a position if you're making a bad options writing trade where you have to buy 100 shares of a stock and then immediately sell it to the buyer for a loss, that can be a pretty substantial red number that hits your account instantly.

Andy Rosen: Let's talk about shorts. If you're ever thinking about betting against a stock going up, you should really know what exactly you're doing because that can affect what happens when it doesn't go your way. So, Sam, tell us a little bit about what exactly is going on when you're shorting a stock or some other asset.

Sam Taube: So as you said, a short is a bet against something. It's an investment that goes up in value if the thing in question, whether that's a stock or a bond or whatever else, goes down in value. And when you're short selling a stock, you're actually borrowing shares from your brokerage and then selling them immediately. You think the stock is going to go down and so you think that you'll be able to buy the shares back later at a lower price and return them to a brokerage and then keep the difference between the selling price and the buying price as your profit margin. It's called short selling because you're selling shares that you don't own. You're short on the shares.

Andy Rosen: So you're betting against a company, you're betting a stock is going to go down. Are there other things you can short?

Sam Taube: I mean you can short all kinds of things: stocks, commodities, indexes like the S&P 500. And for a lot of people, their greatest familiarity with the term shorting probably comes from “The Big Short,” which was this book that then got made into a movie that tells the true story of Michael Burry, who was this hedge fund manager who made hundreds of millions of dollars shorting subprime mortgages. And he did something a lot more complicated to bet against the housing market rather than short selling stocks. He bought credit default swaps, which are basically insurance policies that protect bonds. He bought a bunch of credit default swaps on the subprime mortgage bonds that he correctly thought were going to fail. And then when they started failing, these insurance contracts that covered them went up a bunch in value and he resold them for a big profit.

That's just one example of how there's a whole bunch of different ways to short something. An arguably more common way is that buying a put option, which is the type of option that goes up if the stock goes down, and then writing a call option being on the other side of the type of option trade that goes up if the stock goes up, buying a put and writing a call are both options trades where you win if the underlying stock price goes down. So that's another way to bet against something that's often referred to as shorting.

Andy Rosen: Looks like the upside can be pretty dramatic if you get it right. And what happens on the downside, let's give people a realistic view of what happens if the stock goes up.

Sam Taube: The downside of shorting is arguably more dramatic than the upside because shorting is one of the few operations in finance where you can lose more than 100% of what you intended to risk.

Let's look at an example. If you short sell a stock and you're extremely wrong about it and it triples in value, then you still have to buy back the shares you borrowed and sold. And in that case, you'd be buying it back for three times what you got for it. The thing about conventional short selling is that there's a maximum amount of profit you can make. The best case scenario is that the stock goes to zero, it goes bankrupt, and then in that case you get to keep all the proceeds of selling it. That's the maximum you could make.

But with short selling, your losses are potentially unlimited because for all you know, the stock could keep going up and up and up, and you would be obligated to buy it back for some really big multiple of what you originally got for selling it. And as we talked about, call writing can also put you in a position where you're much deeper in the red than you ever thought you'd be because if the buyer exercises the options contracts, then you might be obligated to buy and then sell a stock for a big loss. So the downside, kind of by definition, can be larger than the upside with a lot of different kinds of short selling or shorting.

Andy Rosen: So I did want to ask you, when you're buying a stock, you're putting money into the valuation of a company that you presumably believe in and hope will use that money to grow and hire people and build things. When you're shorting, what's the sort of view of shorting on Wall Street or among financial people? Do people think of it differently? Is it a different kind of attitude or how does it affect the kind of movement of the market in general?

Sam Taube: That's a complicated question that kind of gets into some deep philosophy of finance topics. But I'm glad that we're going there because there is kind of an attitude that you encounter sometimes that short selling is evil in some way because it's betting against something, it's betting on a bad outcome. And as you said, it's a little more abstract to understand why you're doing what you're doing than if you're buying a stock. But I do want to push back against that because short selling in its various forms does play an important role in the way that our financial markets work.

For one thing, betting against a company or a bond or whatever else, it is a part of what is known as the price discovery process of markets. One of the things that markets do is they take all of these people who are making the best possible guess that they can make about the value of something based on the information that they have. And when you have millions of people playing together in this market and submitting their guesses for what something is worth, those millions of guesses average out into a pretty good idea of what the thing is worth. And all of the different transactions that happen in the market are a part of that.

People who buy a stock because they think it's worth more than it is are contributing to that price discovery process. And people who are betting against the stock because they think it's worth less than it is now are also contributing to that process because they might be acting on information that not everyone else has. And so to again go back to “The Big Short” as an example, that was a case where there was this kind of hidden time bomb in the housing market that no one had noticed because it had been covered up by corrupt rating agencies and a whole bunch of other institutional factors.

But there were a few people who had this valuable piece of information and said, "Hey, we know something that nobody else knows but everybody should know, which is that there's something deeply broken inside of the housing market." And as the book and movie “The Big Short” shows, this idea that something was wrong and people needed to start getting ready to protect themselves against the housing market crash, it kind of started to spread because this small group of traders started making these trades and it caught people's attention and it kind of helped get the word out. So shorting is not inherently evil. I mean it certainly can be kind of a high-risk bet that something bad is going to happen, but it's part of the market's process of determining the value of things. And so it plays a role.

Andy Rosen: Ah, that's very well-explained. I mean, we do need to know what the market thinks and this is a way of getting to it faster, but can you give us a couple examples or any examples of what happens when a short doesn't work out, like something that's happened in the real world?

Sam Taube: Sure. So you might remember that back in 2021, there was this thing where investors on Reddit started pumping up the price of certain stocks. They kind of wanted to see what they could collectively do with the power of thousands or millions of individual traders. And one of the stocks, in fact, the first stock that they kind of pumped up together, was GameStop. And there was this hedge fund called Melvin Capital that had been shorting GameStop really heavily. And part of the impetus for this Reddit buying frenzy is that a lot of people had nostalgic memories of buying video games at GameStop when they were kids and the company had been struggling and there was a certain amount of rage among these people against these powerful Wall Street insiders who were shorting the company and betting on its demise.

So by piling into the stock and shooting up the value of it, they put Melvin Capital in a position where its short position in GameStop started losing a ton of money. And I don't have all the specifics of how the trade went, but I do know that they ended up walking away with a $7 billion loss on GameStop, which incidentally is about the same amount that GameStop is worth as a company today. So you can definitely mess up really badly, especially if you're playing with hedge fund amounts of money.

Andy Rosen: You may think that Melvin Capital made a bad bet, you can't argue with $7 billion, but these are experts, these are people who got high paying finance jobs by having experience doing this and they got into this kind of mess. So obviously a regular person just beginning to learn about trading needs to remember that the downside like this exists I think — doesn't mean it can't work out for you, but these guys are pros and they had this problem.

So, now we're in the high risk, we're in the very deep water here, so I'm going to go into a different area which gets a little outside of derivatives, but I think it's something you often see alongside options trading, especially if you have a brokerage account, you're going to see these terms floating around. I think, Sam, it's really important for us to cover a little bit about what margin trading is.

Sam Taube: Margin trading in simple terms is when you borrow money from your brokerage and you use it to trade, and people do it because it can really amplify your returns. When you borrow money from your broker, you have to pay back the money you borrowed, but you actually get to keep any profits you make with the borrowed money.

And the other thing is that a lot of brokerages require you to have a margin account in order to trade options. The reason for that has to do with the risks we discussed with writing options where you can end up in a position where you need to purchase a bunch of shares to fulfill a contract. And a lot of brokers will require you to have margin to have the ability to borrow money from them because that's their way of ensuring that you will be able to pay for a big potential loss from options trading.

Andy Rosen: Got it. So margin trading, it seems like it's a little easier to understand. You're borrowing money, you have to pay that money back whether the stock goes up or down, but what does it look like if and when it works?

Sam Taube: Now let's say that you use margin, you put up $2,000 for a stock and then you borrow another $2,000, the stock price goes up 25%. You actually make $1,000 in profit rather than just $500. You have your original $500 in profit and then you have $500 of extra profit you made with the borrowed money. So you make $1,000; it's twice as much.

Andy Rosen: So that worked out pretty well for your hypothetical investor there. What happens when it goes wrong?

Sam Taube: So the important thing to understand about margin trading is that you always have to pay back the amount you borrowed, no matter what, whether the trade goes well or whether it goes badly.

So to go back to that example where you put up $2,000 to buy a stock and then you borrow another $2,000; you're carrying twice as much risk. Suppose that you're really wrong about this trade and the stock goes down in value to $1,000, you still have to pay back the $2,000 you borrowed and you end up with a return of negative $1,000. So that's one of the risks is that you can end up with negative numbers, you can lose more than you invested.

The other thing to be aware of, and this can get a little complicated, is that margin is a loan. And like many loans, it's collateralized. An auto loan is collateralized by the car that you're borrowing money for. If you default on the loan, they'll take back the car. But in the case of a margin loan, instead of a car or something, the collateral is actually the value of your brokerage account. And if you look at the terms and conditions for using margin, there's usually a minimum account balance you have to maintain in order to keep trading.

And if you make a really bad trade on margin and it drags your account balance down to below that level, your brokerage can actually force you to either put more money into the account to bring it back up to that level, or they can basically take over your investments and sell them for you. And that's what's called a margin call. If you find yourself in that situation, you might have a few days or even a few hours to fix it before the brokerage is essentially going to repossess your investments.

Andy Rosen: Is it possible to say how often any of these methods really work out percentage-wise, or is it a total crapshoot?

Sam Taube: I found a study on how retail investors do with options trading, and the short answer is that most retail investors lose money options trading. It does not work out for most people. That doesn't mean that it's impossible for you to beat the odds on it, but it is worth noting that it's a game that most people who try it lose.

Andy Rosen: So we've said this a bunch of times, and obviously we don't want to tell people what to do or what not to do, but if you are a person with a relatively modest investment portfolio, is it safe to say that this is not necessarily the most conservative approach to investing in the stock market?

Sam Taube: That's safe to say. These strategies, they have their place, they're not an unalloyed good or evil, but what I will say is that you probably won't find a whole lot of advisors who recommend that you base your entire portfolio around these kinds of trading maneuvers, especially for long-term goals like retirement or college savings. You're probably going to be better off with a buy and hold strategy than doing stuff like this.

Andy Rosen: So in the end, it can provide some real exposure to kind of the inner workings of our global financial system, how things work and what the big dogs are thinking about. But obviously the big dogs may have a little more tolerance for risk and loss given what they've already got.

Sam Taube: If you're someone who is already meeting your goals in terms of saving and you have a big portfolio of index funds and you still have extra money on top of that and you want to do something with that extra money, I think that's a situation where you might have the risk tolerance to try out some options trading. There are situations where it can make sense, but it's not necessarily the foundation of investing and it's not necessarily something you want to do if you're just starting out.

Andy Rosen: All right, well Sam, thank you so much for walking us through our options.

Sam Taube: That's terrible, but I'm happy to help.

Andy Rosen: Did that clarify things for you, Sean?

Sean Pyles: It really did.

Andy Rosen: So obviously, no one's going to get every single in and out of these kinds of products from a few-minute conversation, especially one that involves me. But I hope people can appreciate that there is a real learning curve to this kind of investing.

Even if you never buy or sell an option, you now know a little more about how it affects the economy when people do.

Sean Pyles: Yeah, I really did learn a lot about how these forms of investing work and how they relate to the broader market, but I am still left wondering who has the time to get into any of this unless it is their full-time job.

Andy Rosen: It's a good question. All of this stuff requires real attention to detail and real forethought, even if it's just a little money.

Sean Pyles: So, Andy, only one episode left. Can you tell us what's coming up in the next episode of the series?

Andy Rosen: Well, Sean, today we had ice cream, so maybe cake and cookies next time?

Sean Pyles: OK, I'm down. Bring some milk.

Andy Rosen: How about beer?

Next week we're going to explore investments on other streets, investments that are much easier to understand but can still pose some serious risks. Investments like real estate, commodities like oil and pork bellies, and even art or collectibles.

James Lee: Certain alternative investment classes can zig when the traditional asset class zags, and that can provide some diversification benefit to a portfolio, especially in times when traditional asset classes are volatile and moving downward.

Andy Rosen: For now, that's all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call us or text us your questions at 901-730-6373. That's 901-730-N-E-R-D. You can also email us at [email protected].

In addition, visit nerdwallet.com/podcast for more on this episode and remember to follow, rate and review us wherever you're getting this podcast.

Sean Pyles: This episode was produced by Tess Vigeland and Andy; I helped with editing along with Liz Weston. Chris Davis helped with fact checking, Kaely Monahan mixed our audio. And a big thank you to the folks on the NerdWallet copy desk for all their help.

Andy Rosen: And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Sean Pyles: And with that said, until next time, turn to the Nerds.

Neither the authors nor editor held positions in the aforementioned investments at the time of publication.