Want To Learn Options trading
Options trading has become popular now ! They offer leverage thats hard to beat, its like buying the stock at a 60-70-80-90 % discount, you can buy some stock options for as little as $50.00 for 100 shares.
There are many advantages of options trading and there are a few dis-advantages, so here we will discuss both, but first the advantages. Leverage thats the big advantage ! with a small amount of money you can control a large amount of stock shares, like owning a house by only putting a small down payment to control the house. If you are not willing to learn all about stocks then you might as well " not " buy options because your timing might be off. Its very important to have the right timing with options because they expire , most of them expire worthless , its all about timing with options trading. However if you study and improve your timing then options offer leverage and with improved timing you will have a one-two punch, a powerful strategy on your side. The dis-advantage is that options do expire and most of them will expire worthless, yes thats right, if you let them, because you always have the choice to sell them before they lose all there value, you can sell them anytime before expiry, and if the stock is not moving then don`t buy the option yet , wait until the stock starts moving across a trend line etc...Timing, Timing,Timing. The other advantage is that you always know your exact amount in options trading that you can loose and that is only what you paid for the options,the option premium and that is it ! Lets look at a recent trade, i bought the stock ," USG " $62.50 calls and at the time the stock was at $50.00 so i bought way out of the money calls, cheap calls only .85 cent a share or $85.00 for a 100 shares, options always trade in a 100 shares, one option contract is 100 shares always in the american exchanges. I bought 10 calls at .85 cents that = $ 850.00 and i controlled 1000 shares of the stock " USG ", 1000 shares for $ 850 for 3 months and the most i could loose was the 850.00 thats it , i knew my total risk from the beginning and this is what happened.. USG took off and went up $5.00 in one day and 2 days later went up $3.00 more so now it was at $58.00 , it never reached the $62.50 area but the option still went up in value, how much well it went to $2.50 each or $250.00 for each contract thats about 200 % per contract in 3 days ! Now lets look at what would have happened if i was to buy the stock, ok we pay $50.00 a share , we buy 100 shares for $5,000 thats all we can afford, so the stock goes up $8.00 a share and we make $800.00 because we own 100 shares right ? invest $5,000.00 and make $800.00 not bad right? well thats about 17% on your money and risking $5,000.00 or $5,000.00 is tied up I invested $850.00 and made 200% and only risked $850.00, do you see the " BIG " difference ? >>> LEVERAGE >>>>
>>>>> Learn all about call-Options here >>>>>
|