Ponzi Schemes: What They Are and How to Avoid Them

There are investment deals that are just too good to be true. One of those deals is the Ponzi scheme. For decades, experienced financier Bernie Madoff promised his investors substantial, yet stable returns using the split-strike conversion strategy. This is a viable plan that involved: Buying a handful of shares from companies in the S&P 500. Sell call options to limit how much the stock can be bought no matter how high the market goes. Buy put options that also limit the stock’s price no matter how low the market…

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