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An option pool is a type of investment wherein a company that does the investment pays for the option and risk on one or more underlying financial instruments at the same time. An option pool is an attractive option for someone who doesn't have the time to devote to researching and managing individual investments. It is also an appealing option for someone who wants to diversify his or her portfolio.To be in an option pool means you are buying an option on a financial instrument, which is often a stock, currency or index. The option in the pool represents a right (sometimes called a premium) to buy or sell a specific underlying asset at a pre-determined price on or before a certain period of time. The price you pay for the option will be the underlying asset's value at the time the option is purchased. If the option is successfully exercised, the purchaser of the option has the right to sell (cancellate) the contract for a particular price.Some people use option pools to reduce their overall risk level. When you invest in options, there is a chance that you are going to lose all or part of the money that you have invested. To reduce your risk, you can agree to put up only a small percentage of your investment as a guarantee with the financial institution that will handle the option pool. When the price goes down because of the risk you bear, you only lose a small portion of what you have put up. This allows you to still have some of your money exposed when the market moves against you.Option pools come in many different types. One type of option pool is called a naked option pool. With this option pool, you put up just enough of your money so that you won't be sucked in to a trade if the underlying price goes down. Two12 is the amount of money that you put up. You don't have to worry about protecting your downside in this scenario. If the underlying price goes up, you will make money, but if it drops too far, you will end up losing your entire investment.Another option pool involves putting up a large amount of money as the price is low. The logic behind this option is that if the price goes down, you will make money, but if it goes up too much you won't want to risk it. In theory, you can always sell your options at a profit and buy them back later at a lower price. However, if nobody is making a lot of money on the option then you may not get your initial investment back.When you are trading futures options, option pooling is also something that you should consider. As an investor, you will want to spread out your risk as much as possible. One way to do that is to only put your money into options that are guaranteed to have no downside. For example, a call option is a contract for a specific time frame. The strike price is determined by the underlying, which is the company or person that is issuing the stock. By putting all of your money into these calls, you will never actually cash in on your investment. Two12 is to put all of your money into one huge option. By buying up all of the identical options, you can lock in at a low price and gain a lot of money over time. The problem is that if you do this, you are gambling because you really don't know what the underlying stock is going to do.One of the easiest ways to determine whether you should put money in an option pool is to use the Kelly Criteria. This is a formula that evaluates how much different options are likely to change the value of the underlying security. For example, it takes into account the effect of premium changes, the amount of dividends paid out and other factors. Using Two12 will help you to determine how much money to put in. If it turns out that putting in all of your money would be a waste of it, then you probably should not be putting your money into option pool investments.