The stock niche is certainly one of the very best in terms of accepted procedures to make money.
Within the commodity marketplace one very very nice process to establish capital is options trading. I generate 15 t0 20% every single month by trading options, more notably put options.
Currently there are typically 2 points to put options investment.
There is the actual facet relating to protective cover on ones balance also known as getting insurance for your stock, and then there is the wealth building, monthly cash flow side aka getting paid to own a stock. Why don’t we have a quick peek at both of those.
Buying Insurance with Put Options
To be the possessor of this put options contract, there is an “option” to offer a stock at a very certain price up until you sell your option or the particular option expires.
A lot of investors use puts to protect their accounts from big movements to the downside as well as to lock in profits.
For example, let’s imagine a trader bought a stock and it increased in price by about $10 per share. This will be a really big move.
Now the question you might be asking is…should you take profits or let it ride? In addition, you need to take into account that should you choose nothing, your earnings could be destroyed in minutes with some not so great. Taking absolutely no action is probably the most detrimental actions to take within the stock market.
What do you do in that situation?
You may buy a put option with a strike price which is a number of prices below the current price of the stock. By doing this, it will be possible to sell your stock at this strike price regardless of what happens to the cost of the actual stock. For example, if you acquired the stock at $200 and it went up to $250, you can actually purchase the put at $240. With the $240 put option, regardless of 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 hand of the put options coin is how you can create wealth with options by making residual income month after month.
In order that the stock buyer to shield his stocks by purchasing protective puts, he will need to have someone ready to sell those put options to him.
I personally make money on a monthly basis by simply selling put options against stocks I’d be ready to own and occasionally against stocks that I never plan to own.
The key to successfully building wealth with put option selling is usually to sell puts for securities you would not mind getting and also consider stocks which are relatively flat as far as their price goes. Flat stocks are generally stocks that move not more than $3 within a four week period and possess small PE ratios.
I’ve found that I also have a substantial amount of success through stock trading inside the $20 – $30 price range. Anything higher as well as cheaper tends to be too risky if you ask me.
Author: Dale PoyserThis author has published 8 articles so far.