Stocks And Money Information

Do not spread your money too thin.

My friend has a little over $300,000 invested in the stock market through 25 different Mutual funds. In my opinion, 25 Mutual funds is 25 too many collecting load fees, management fees, commission fees, operating and advertising fees.

Diversity is important, but just as important is over-diversification. Also, in my opinion, $200,000 should not be put into more than 12 stocks, let alone 27 different Mutual funds.

2. Do not pay commission fees to purchase a stock.

If you are going to invest your hard earned dollars into a company, the least the company could do is provide you a way to invest in their company commission free – and they do!

3. Only purchase those companies that pay a dividend.

The same company that you invest in commission free should also offer you another incentive for you to invest – a dividend for the use of your money.

4. Only purchase those companies that have a history of raising their dividend every year.

The same company should continue rewarding you for your faith in their company by increasing the amount of their dividend every year. Rising dividends are also the proof that the company is doing something right.

5. Dollar-cost average into each stock position.

By dollar-cost averaging (buying the same stock at different prices through the years) you’ll never pay too much for the company’s stock, even if the initial purchase is at a 52 week high. Have all the dividends from each company rolled back into more shares of each company, until retirement. The companies you invest in should do this for you, automatically, commission free.

6. Forget making a profit; instead focus on the income provided from your stock portfolio.

That’s right! Forget making a profit. The burden is now lifted – no more pressure on tryingto make a buck in the stock market. (Instead of trying to bend the spoon, that is impossible, instead just think of the spoonas – omigosh! – I’m in the Matrix!) When you focus on the amount of money your holdings are providing in dividends – and when those companies selected have a history of raising their dividendseach year – a lower stock price allows the dividends that are being rolled back into the stock to accelerate your income. The total value of your portfolio may go lower, but your income from that lower priced portfolio would increase dramatically. Profit by income!

7. Make every stock purchase with the intent that the purchase will be a long-term investment.

Do not trade in and out of your holdings. There have been many up and downs in the stock market. The down markets only accelerate your income. GE has raised their dividend for 28 years in a row. Why sell it? 100 shares of GE ten years ago has turned into 1200 shares today due to stock splits, and that is not counting how many shares you would have now if the dividends were being rolled back into more shares of the stock through those years.

8. Understand that a lower stock price, after your initial purchase may be a blessing in disguise.

The income from your stock holdings should grow every quarter, no matter what the total amount of your stock portfolio is worth. (If your Mutual fund declines in price from one year to the next and if your income is not increasing (accelerating) from that fund, why are you in that fund?) A company pays their dividend not on how much their stock is worth in the market place. For example, a company pays a quarterly dividend of 50 cents a share. A company has little control on how much its stock price is worth in the market place on any given day. You will receive 50 cents a share per quarter whether the stock price is at 50 dollars a share, or drops to $40 a share or goes up to $70. While the stock is down at $40 a share your dividend reinvestment is loading up on more shares.

9. Develop a savings plan to add to your holdings each quarter to help your dividend reinvestments to accumulate more shares on a dollar-cost averaging basis.

The savings could be as little as $5.00 a week. Why put that savings in a savings account at 1.2 percent, when there are so many companies out there that are paying a 4 to 5% dividend yield and increasing their dividend every year? And since none of the companies you are investing in charge a commission, all of that $60.00 a quarter you saved and invested would help your dividend reinvestments to dollar-cost average into your holdings. Every cent you save and invest would work toward your ROI (Return on Investment).To read the PREFACE from the book ‘The Stockopoly Plan’ please visit http://www.thestockopolyplan.com.About the Author: Charles M. O’Melia is an individual investor with almost 40 years of experience and passion for the stock market. The author of the book The Stockopoly Plan – Investing for Retirement; published by American-Book Publishing. To invest in a copy of the book: http://www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml

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There has never been a need for good companies that are going places to resort to these type of tactics, but there has always been a need for poor, sinking, or shady companies to do so. If you choose to ignore this advice you deserve what happens to your investment.
You may also run into difficulty trying to find a buyer for your shares once you decide it is time to sell.

Very Low Volume Stocks – Without much trading activity it becomes increasingly difficult to buy or sell for the prices you want. As well, it becomes nearly impossible to get an understanding of where the stock price is heading, or to calculate fair valuations for the company’s stock price.
Not only that, but companies subject to low trading volume generally do not have a lot of positive interest.

The Hot Tip Stock – There are actually professional promoters who make a very good living generating and nurturing rumors about some penny stock that’s guaranteed to go through the roof. The entire concept hinges on the rumor being spread from person to person, at the office, over the phone, or at social venues.
The promotional ploys can be very costly for investors who get involved without special knowledge about the company or the actions of the promoter. In most cases if a stock really is going through the roof you won’t hear a word about it, because a select few individuals will be very intent on keeping the information to themselves.

Guaranteed Performance – If a stock is guaranteed to go up, it will almost always go down. Nothing is ever certain, especially on the stock market. When someone guarantees certain performance out of a stock, they may be a promoter, naive investor, self-serving broker, or have heard the guarantee from another source. In any case, don’t believe them. Instead check into the company yourself and if you feel it is a good investment, you may want to proceed.

Sinking Ships – When a stock has dropped a lot you may think that, “it can’t go any lower,” or that it is “a good bargain.” Especially with penny stocks, you need to avoid this type of thinking because many sinking ships don’t ever rebound, and they can go lower, and they aren’t good bargains just because they cost less than before.

Commission Free – If you are interested in getting stock commission free you may think you are saving money, but it generally means that you are buying over the counter stock directly from a promoter or the company.
Either way, they take their own invisible ‘commission’ from you, either by selling to you for an arbitrary amount which is unfairly high, or selling to you for the asking price rather than the bid price based on their own current valuations.

International Penny Stock – We’re not talking about living in the U.S. and steering clear of Canadian stock, or vice versa. We are talking about penny stock issues from Africa, Australia, European, Russian, or South American penny stock markets. First of all, you won’t be too impressed with the level of investor protection and exchange honesty in some of these regions, and you most certainly won’t be too impressed with the broker fees you incur when trying to purchase internationally.
Besides, if you can’t find good penny stock investments in North America, you won’t be able to find them anywhere else either.

Warrants and Rights – These are not technically stocks, but instead are derivative investments based on an underlying company’s shares. However, they often appear like penny stocks because they sometimes get listed in the stock pages, and often trade for pennies.
It is unlikely that you will accidentally purchase derivatives, but make sure you know what you are trying to buy by understanding the listing criteria of the paper you are reading, or verifying your purchase with your broker.

To get free information about investing in penny stocks visit www.pennystocks.com.They offer information on the definition of penny stocks, getting started, benefits, risks and how to find a good penny stock.About the Author Peter Leeds, one of North America’s leading Investment Coaches, is a self-made millionaire who has created his fortunes on the stock markets. He has also empowered thousands of individuals to do the same. His personal success and incredible ability to consistently pick money-making stocks has earned him a loyal following of successful investors and has generated significant attention from the financial world.

What is a Secured Loan?

A secured loan is any loan that is secured on your home or property. It is any loan which requires you to provide the lender with some form of security other than just a promise to pay. The security will be your property or home. The property may be mortgaged or owned outright.

If you agree to a secured loan on your home, you should remember that, although the property remains in your possession, it can be repossessed by the lender if the loan and the interest are not paid according to the agreed terms. The lender will then sell the property in order to recover the money you borrowed plus any additional costs incurred in recovering the money.

Secured Loan Benefits

In many instances secured loans can be repaid over a longer period with a lower monthly repayment. The interest rate will be lower on a secured loan than on a comparable unsecured loan. A secured loan may also offer more flexible repayment periods.

1. If you’re a homeowner, you may get a lower rate through a secured loan using your property as security. By taking out a secured loan, you are agreeing to allow the forced sale (foreclosure or repossession) of the asset in order to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower. This is why secured loans tend to be cheaper than unsecured loans and other forms of borrowing. The lender has the added benefit of security, which provides protection in the event of your inability to repay.

2. Secured loans are more easily accessible to those with a poor credit record. This means that persons who are self-employed, or who have recently changed jobs, or who have adverse credit (ccjs, arrears, defaults, etc.) can take out a secured loan.

3. You can borrow larger amounts and repay over a longer period. The amount available usually ranges from £3,000 to £50,000, although some lenders will consider lending more. Compare this to unsecured loans where you’re only allowed to borrow up to £25,000. If you wish to borrow a larger amount or if you require a longer period in which to repay the loan, secured loans may be the most suitable for you.

4. You can consolidate more expensive borrowings into a single much cheaper monthly payment. You may choose to take out a secured loan in order to consolidate debts and replace high-interest loans with a low-rate loan. The loans being consolidated may include higher purchase loans, unsecured loans and credit cards.

Useful Points to Remember

Before you take out a secured loan, make sure that you can afford the monthly repayments. Also, read the loan agreement carefully and pay particular attention to the rate of interest required, the term of the loan, the repayments required and the total amount payable. If you fail to repay the loan, the lender may repossess your property or home and sell it to repay the loan. If you borrow money using a mortgage as security you are agreeing that the lender can claim the mortgaged property if you fail to keep to the agreement. Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. You can read some more articles about Secured Loans at: http://www.commercial-mortgage-guide.org.uk/loanguide/

About the Author

© Copyright 2005, Bwalya Mwaba writes for the The Commercial Mortgage Guide. Visit our website for mortgage related news, articles, tools and more: http://www.commercial-mortgage-guide.org.uk/

Here we continue to discuss a few commonly held beliefs, or “myths,” that hold many of us back from achieving success…

Myth 6: If you weren’t born into money, you’ll never be rich.

Fact: Millionaires are made every day. Many of them are self-made millionaires – people who started with nothing or close to nothing and amassed fortunes. Simply because they decided to and they didn’t let anyone dissuade them from their goals.

If you believe that you have to be born into money to be rich, you’re missing out on all the riches out there, waiting for you to claim.

Myth 7: If I win, someone else has to lose.

Fact: This is absolute, high-grade, premium quality nonsense. There is enough opportunity and enough money in this world to go around so that everyone can be a winner. In fact, there is more than enough to go around.

The only reason they’re not winners is because they don’t believe they can ethically and morally do so. (Remember “the earth is flat” story?) As soon as we get rid of that belief and take a step into the unknown, we begin to realize how much wealthier you can be. You also realize how your being a winner can only help others win as well!

You can become rich by using ethical and legal means – without having to cheat or hurt others. In fact, that’s the only way I recommend that people do it.

The easiest way to become rich is to create value in other people’s lives. There are no losers in that scenario.

Myth 8: Making a profit is a sin.

Fact: If you cheat or hurt others to make a profit, then yes, in that case, making a profit would be bad. But if you create value for others, then making a profit is always good. By creating more value for others, you’re helping them live better lives. There is nothing sinful in helping others, doing a great job at it, and getting paid for it.

Money doesn’t turn good people into bad people. Money simply magnifies the qualities that are already inherent within a person. If you’re a good person, having more money will only allow you to do more good! If you’re a bad person, having more money will allow you to do more bad.

And most of us really are good people. And we have a lot to offer others. And you can only do more good by having more money.

Myth 9: Having more money will mean that I’ll have to work hard all day and not have time for my family, friends and leisure.

Fact: There’s a huge difference between working hard and working smart. Successful people have learned to work smart! They have learned to find other successful people they can model after so they don’t make the same mistakes other people did. And by doing so, you can save a lot of time, money, effort as well as some major headaches.

Getting your business started and running does require work. There’s no way around that. But, you can still take time out for your loved ones and for your leisure. In fact, it’s highly recommended that you do that. If you’re spending all your time trying to keep your business afloat, you’re either not going about things the right way or you’re just in the wrong business.

Myth 10: If I have more money, people will judge me, and they will not like me very much.

Fact: People will judge you anyway. They are judging you right now! It’s what they do, unfortunately. Most people don’t know who you are anyway! They don’t know the “real” you. They only know who they think you are, based on what little information they have about you. So, let them think or feel what they want. They don’t know any better. And you really shouldn’t be concerned about those people.

Remember, respect and friendship are earned. If they can’t appreciate who you are, then they don’t deserve your time, or your thoughts.

Many of these myths that have been floating around for hundreds of years and were typically conjured up by people who didn’t know any better. Many of them got programmed into us when we were very young. But, we’re adults now. We can think for ourselves. We can choose to adopt only those beliefs that benefit you and drop the ones that are no longer useful or empowering. It’s all up to you.

Beliefs are very powerful indeed. They, for the most part, are what dictate the quality of your life. Change your beliefs and you change your life.

Free your mind, and success will follow!
About the Author

To uncover all 10 myths visit: http://www.trafficstrategiesonsteroids.com/tenmyths.pdf for your FREE ebook. Ian Canaway will help you launch your very own money making website today that’s 100% ready to take orders and pull in massive profits for you right now. guaranteed! http://www.asuccesfullhomebusiness4u.com

Here are a few commonly held beliefs, or “myths,” that hold many of us back from achieving success and making lot of money for ourselves.

Myth #1: I don’t have what it takes to be successful and wealthy.

Fact: Successful people were not born that way. In fact, many of the most successful people today had very difficult lives. They were regular people who wished for more. And they decided to do something about it – to change their circumstances. Anyone can do the same, including you and I.

Myth 2: I don’t have any experience or education in anything.

Fact: Many successful people started with no experience. Many of them also flunked high school and never had any college education.

The only way to get real education and experience in anything is by doing, by “starting.” Once you start doing it, you learn very quickly.

Think of all the things that you know how to do. Driving a car, riding a bike, playing sports, reading, writing, speaking…even walking. All of these things have one thing in common: at one time in your life, you didn’t know how to do any of them.

And despite how impossible it seemed at the time, you decided to do it anyway. It’s the same with everything in life. You learn by doing. You get experience by doing something a few times. Get started. Do it once, twice, three times and you’re already on your way to becoming an expert in no time!

Myth 3: To be successful, I have to start a business, and I’m just not cut out to be a businessperson. I don’t have what it takes.

Fact: Listen…I know a few people who can barely read or write. Yet they’re running their own businesses. It’s scary, I know. But think about it…right now, at this moment, you’re already several giant steps ahead of them.

The only difference between a person who’s thinking about starting a business and another who is running a business is just that. One of them is doing what the other is only “thinking” of doing. They both had the same ideas and dreams. They both probably had the same doubts and fears as well. But one of them decided to start anyway, to take action despite the doubts and fears. One of them decided that if other people could do it, then he could as well.

Myth 4: Money isn’t that important.

Fact: Tell that to the family who’s starving right now, or to the family who needs money for serious medical help for a member of their family. They’ll tell you how important money is.

We’ve been conditioned from Day 1 to believe that money is not important. We have been conditioned to believe that wanting money is wrong and unethical. And yet the entire world seems to run on money.

It is one of the biggest myths known to man. And it’s one of the main reasons why the majority of the people are not wealthy.

Money is simply a way to measure the amount of value you create for others. If you have a lot of money, it means you have created a lot of value for other people. If you don’t have the kind of money you’d like to have, that simply means that you just haven’t yet found a way to produce the kind of value for others that you’re capable of, or the value that you’d like to.

Just look around you at the countries or even cities that have lack of money. You’ll find that in these same places, there are usually more crimes being committed, more people taking advantage of others, more diseases, more suffering, more deaths, and none or very little education.

Money may not be the most important thing in life, but let’s face facts here… Money is pretty darned important in this day and age. It’s how you support yourself! It’s how you buy food, water, shelter, and clothing. It’s how you pay the medical bills. It’s how you help and support others around you, including your loved ones. And we both know that those are very important things.

And by the way, if you feel that it’s more important to contribute to others than to be rich, well guess what, when you have more money, you can contribute more! You can do much more for others and you can help a lot more people when you have more money.

Only good things can come from having more money.

Myth 5: Money must be made slowly.

Fact: Nothing could be further from the truth. The only way to make money is to make it quickly! What good is money if you can’t enjoy it right now instead of 20 years from now? What good is money if you can’t contribute to others now as much as you’d like to, instead of 20 years from now?

The quicker you make money, the quicker you can change your life and the lives of those around you – for the better. There are no rules stating that money should be made slowly.

The only way to make money is to make it quickly! You will also find that the more money you make, the easier it becomes to make more because you begin to shift your focus from survival to abundance and contribution, in the process. And that shift in focus simply attracts more wealth to you.
About the Author

To uncover all 10 myths visit: http://www.trafficstrategiesonsteroids.com/tenmyths.pdf for your FREE ebook. Ian Canaway will help you launch your very own money making website today that’s 100% ready to take orders and pull in massive profits for you right now. guaranteed! http://www.asuccesfullhomebusiness4u.com

Let’s briefly describe The Stock Market for those who are new to the financial world.

What is The Stock Market?
It is by definition a market in which shares of companies stocks are bought and sold. Let me explain this. When companies start growing they need to find investors willing to invest on the company. They need to rise money to keep buying machines and products and to expand their businesses. At the same time many investors want to find companies where they can invest their funds, so they can receive passive income from the growth of those companies, which usually cause a growth on their portfolio of invested funds.

How is The Stock Market organized and why?
Companies discovered a long time ago that the most profitable, easy, fast and effective way to find the investors is through an organized system, in which there is liquidity, and through which all interested individuals could bring in funds to keep developing their businesses and enterprises. That originated The Stock Market, which have been evolving and improving for a long time. People can trade and invest on this market through Exchanges. For example the New York Stock Exchange, or the American Stocks and Options Exchange. Exchanges are regulated agencies, which facilitate the transactions between buyers and sellers and ensure the fairness of each transaction for everyone. Stockbrokers also facilitate transactions for their clients and earn a commission for doing so.

What is the difference between a trader and an investor?
On this market like in many others you can be and investor or you can be a trader/speculator. Investors are corporations or individuals that want to invest an amount of money, usually a large amount, and keep on the market for a while to profit from a long term trend. They want to grow their money, but they also want safe investments. They are not gamblers. They usually have large amounts of available funds so they can afford to leave their money on the market for months and some times even many years (2-5 years and more). Traders and speculators usually want fast profits. They may or may not have large amounts of available funds for trading and even if they do, they don’t want to risk them too much. This is because traders usually take considerably higher risks than investors do. Many of them not only trade shares of stock, but also derivatives. I explain that bellow. To get bigger profits they incur in biggest risk. Many of them are those that want to become rich in a few months. They want higher than average results. In fact they want the highest possible results. Many traders and speculators loose all their money on The Stock Market while others make fortunes. I think that knowledge, sound reasoning and common sense are three major factors affecting the outcome of any financial decision that you make.

What are stocks, stock symbols and stock shares?
The term stock usually refers to the name of the company or symbol. For example the stock symbol for Microsoft Corporation is MSFT. When you want to check quotes or check the graphics on your account you enter the stock symbol and get all the information. What are traded through exchanges are shares, shares of stock. A share is a piece of ownership. Think about this as a pizza where the pizza is the stock or the company and every slice is a share. There are companies with millions and millions of shares, (slices) while others have less shares. When you buy, sell invest or trade, you are commonly dealing with the companies shares. Usually if the companies increase in value, you make money. If the stock price rise you make money (If you have a long position, which means you bought the shares). Other factors could affect your profits also like news, rumors and market sentiment.

Do I need a stockbroker to become a trader or investor?
You can seek the advice of a license professional, a stockbroker, or you can trade by yourself using the Internet. There is an increasing number of individuals that are investing and trading from the comfort of their own house. To do it by yourself you will need to sign up with a brokerage firm like E*Trade or TD Warehouse or any other. There are many out there. You can choose which one fits your interests and your needs. Once you sign up and fund your account you can start trading for yourself. Although people often like to have a stockbroker make all the trading for them.

What is volatility?
I will define volatility in my own words. It is has to do with price fluctuations, how fast and often prices change. If the stock price decreases and increases fast and too much in a short period of time, it is said to be very volatile – the prices change too often, too fast and the difference is big, so the investment is risky. If the opposite happens and the prices almost don’t change at all, it is said to be a low volatile stock – if there are not sudden and unexpected price changes, then the investment is less risky. Traders usually prefer volatile stocks, because they seek to profit from sudden price changes in a short period of time. Investors prefer steady, slow but secure growth. They don’t like surprises very much.

What are derivatives?
Derivatives are financial instruments that derive their value from the underlying assets. There are a wide variety of derivatives and they are flexible instruments. Some derivatives for example may derive their value from other underlying derivatives. The main idea is that they do not convey ownership like stock shares, they just establish rights and obligations.

Derivatives are a little bit harder to understand than stock options. There are many different kinds of derivatives on the financial markets. Even experienced investors may know some of them, but not all of them. I will briefly mention the most commonly used, Options and Futures.

What is an option contract? What are stock options contracts?
If you buy an option you have the right but not the obligation to purchase something, whatever it is that is specified on the contract. In the case of stock options you have the right to purchase shares. Option contracts use specific terms. They also include a period of time in which you can exercise the option, which means you can buy the underlying asset. If you don’t exercise the option on the specified period of time, then your option expires worthless and you loose the premium, the money you paid for the option. Why are options so famous, so useful and so important? Option trading can make you earn much higher return on your investment or they just can make you loose everything fast. In other words you can leverage your investment. You can have explosive profits, but you must be willing to accept the high risks involved with option trading, you can loose it all fast. Remember that if you don’t sell the option contracts that you bough or if you don’t exercise them on the period of time specified on the contract, then you just loose your entire investment. Sometimes people start trading options without even knowing this! All of the above may sound a little confusing for new traders and investors. Stock options contracts may require you to study for a while before you can start to understand the entire process or how they work. I didn’t mention here definitions like the following. What is a call option? What is a put option? What is the option delta? What are the “Greeks”? What are options on futures? What are compound options? What are exotic options? And many, many more. Even when it sounds complicated for those that have no previous experience trading options, once you learn its inner workings and all the processes related to them, you can profit big time from these derivatives. Remember that in any business knowledge is the key to success.

What are Futures Contracts?
A futures contract is an agreement to buy or sell something, it could be a commodity or a stock for example, at a specified price on a particular date on the future. For example you make an agreement to buy 100,000 shares of Microsoft Corporation at $50 each two months from now. At the same time, someone somewhere is making the same agreement but instead of buying, that person is selling. These contracts are traded through exchanges which take neutral positions so they don’t loose. What’s the deal here? For example if today is January 1st, and you agree to purchase the stocks above by April 21st under those specified terms and conditions, and if the current stock prices is $45 per share check what happens. If the stock price rises in value from January 1st to April 21st let’s say to $75 per share, then you receive the contracts at $50 each share and immediately sell the contracts at $75 per share so your profit is huge. If the stock price goes down, you can sell the contracts before April 21st so you don’t loose that much. This is another kind of derivative that is very profitable for many traders. A very important fact is that you can also leverage your trades with this kind of derivative and get better results, but at the same time, you incur in higher risks.

If you want to learn more about the subject above visit the website bellow, which is full of valuable information that can turn you into a very wealthy person – (courtesy of John Kaka). John has years of experience on subjects related to business, finance, wealth building, how to profit from e-books, the stock market, forex market, real estate, employment, true home based business opportunities, how to attract amazing wealth to your life, and everything related to money, business and finance.

John Kaka © 2005.

About the Author

http://hop.clickbank.net/?j345/waytrade

Use this article as you please, but leave its content
intact and include this author’s resource box. – John.

Normally it is advisable not to trade in socks. Stocks are meant to be invested. If you however wish to trade in stocks the preference should be in stock options. Many may have told you the options are very risky financial instruments and large sums of money can be lost. But the fact is that options are far less riskier than directly buying the share of the company in the market.

Let us analyze stock ownership. When you trade in a stock, the price can go up or down or it may merely trade sideways. If you buy a share and if its price goes up you make money else you loose. If its price moves sideways you still loose the financing (interest) costs. You also loose brokerage charges. There is also an opportunity costs as you are not involved in other potentially profitable trades and investments.

You can also short sell a stock – sell a stock which you do no own by borrowing with the intention of buying back at lower prices and return the stock. The price difference is your profit per share. Here too same risks are likely. When the price of the share you have sold goes up instead of down you loose the money as you have to buy it back at higher price.

Even if you do not want to trade and merely want to own a stock that too is risky
If you purchase 100 shares of a $100 stock it will cost you $10000. And if you buy it on margin funding you pay 33% of the cost but it means you still have to shell out $3300. That is significant money to outlay. And, more importantly it is a lot of money to put at risk. Especially as you have a mere one in three chance of the stock moving in the right direction. Plus as stocks don’t trend all that often you not only need to pick the right direction, you also need to be able to pick the right time.

So stock trading is not that easy but is very costly. So you can try trading in sock options.
For a start you only have to invest about 3% of what the stock was worth and yet you still control the same 100 shares. In the example above, instead of investing $10000, we might only have to outlay $150. If we select the right strategy, we can profit no matter whether the stock price goes up, goes down or even goes sideways. And finally, our risk is limited. The maximum we can lose is the amount we put into the trade $150 in the example above.

But the best thing of all is the leverage that options provide. In the above example, if the stock price goes up by $10, the profit on the stock trade would only be 10%. If we buy on margin it would be 33%. But with this increase in stock price the value of the option might increase by 100%. And so the profit on the trade would be 100% – or ten times that of the straight stock trade.

Trading in stock options is actually less risky and far more profitable. If you devote a bit of time in studying the trends and understanding options you can make a fortune.