The stock niche is certainly another one of the numerous ways for you to generate money.
Within the actual stock niche one very very cost-effective ways to create wealth is options trading. I personally get 15 t0 20% every single month by trading options, more notably put options.
There are actually two different parts to put options investment.
At this time there is the element associated with safeguarding an account also known as buying insurance for your stock, and then there is the wealth building, monthly cash flow side aka getting paid to own a stock. Let us have a quick view at each of these.
Buying Insurance with Put Options
To be the possessor of this put options contract, you have the “option” to offer the stock at a certain price until you sell this option or the option expires.
Nearly all investors take advantage of puts to protect their trading account from big movements to the downside and also lock in profits.
For example, let’s imagine an investor purchased a stock and it went up in price by about $10 per share. This is definitely a fairly large move.
At this point the question you will be asking is…must you take profits or perhaps let it ride? Additionally you need to take into account that if you do nothing, your earnings may be erased within minutes with some not so great news. Taking absolutely no action is probably the worst steps you can take within the stock market. What do you do in that situation?
You can buy a put option with a strike price which is a number of prices below the current price of the stock. Using this method, it is possible to sell your stock at that strike price regardless of what happens to the cost of the actual stock. For example, if you acquired the stock at $200 and it increased to $250, you could purchase the put at $240. With the $240 put option, it doesn’t matter how low the stock goes, you can still sell it at $240! So, if the stock drops to $30 per share, you can STILL sell it at $240, think about that for a second…let it sink in.
Making Monthly Passive Income with Put options
On the other side of this put options coin is how you’ll be able to create wealth by using options through passive income each and every month.
In order for the stock buyer to secure his stocks by purchasing protective puts, he will need to have someone willing to sell those put options to him.
I make cash every month by simply selling put options against stocks I will be ready to own and often against stocks that I never plan to own.
One of the keys to building wealth with put option selling is always to sell puts for stocks you wouldn’t mind getting and also find stocks which are relatively flat with regards to their price goes. Flat stocks are usually stocks that move at most $3 within a month and also have really low PE ratios.
I have found that I also have a great deal of success through stock trading within the $20 – $30 price range. Anything higher or even cheaper tends to be too risky in my opinion.
I have been investing for over a decade and have done meticulous research on how to build wealth. My primary focus is on strategies that can create low risk residual streams of income.
Author: Dale PoyserThis author has published 8 articles so far.