BOSTON ( TheStreet) - For many investors, options trading is a numbing jumble of complex strategies and foreign jargon.But, according to Randy Frederick, director of trading and derivatives for Charles Schwab ( SCHW), investors who cut through the confusion can find a valuable approach for diversifying their retirement plans and hedging against turbulent markets. "Options will never be as simple as equity trading or mutual fund investing, Frederick says. "The key is to learn as much as you need to know to be effective using these strategies, but not flood yourself with all this information that you really don't need to know." At their simplest, options are contracts that give investors the right to buy or sell a security at a certain price. Call options give the holder the right to buy a specified number of shares of stock at the strike price at any time until the contract expires. Put options give the holder the right to sell a specified number of shares of stock at the strike price until the contract expires. A buyer can choose to buy or sell the underlying equity, sell the option, or allow it to expire worthless. Sellers have an obligation to act on one of those same scenarios. A "short put," enables the selling of a put without owning or shorting the underlying instrument. If it reaches the strike price, the issuer earns the premiums sold on the option. If the stock drops below strike price, the shares must be purchased, usually at a favorable price and with premiums intact. Frederick advocates a conservative approach to options, deploying them as an alternative to the skimpy yields of many bond investments. You won't break the bank and you can maintain a steady return of a couple of percentage points a year with rare losses. "Slow and steady wins the race," he says. "That doesn't mean you will always eliminate all your losses, but even in a really awful market, like we had in 2008, the proper use of very conservative options strategies could have cut losses in half, if not more." Options aren't without risk. Investors can lose money on options if the value of the targeted security appreciates beyond the strike price. Still, the tax benefits of individual retirement accounts, or IRAs, makes them a natural vehicle for deploying options strategies, Frederick says. "It is a great way to be in a small-income generating mode while at the same time picking up stocks that you want to own at really good prices."