Archive for the ‘Twelve Days of Christmas’ tag
On the Third Day of Christmas – US Options Trading Part 1
On the Third Day of Christmas My True Love Gave to Me, $1,200 Credited Into My Bank Account Last Night!
I’m very excited to be able to write about this today! I initially had ‘US Stock Options Trading’ as the 6th Day of Christmas to keep you in suspense, but last night’s windfall was too much to contain!
One of my Free World income stream experiments is US Options Trading. It’s one of the online streams of income that doesn’t involve blogging, building a reputation, getting subscribers or trying to sell anything. The results are based on you and you alone and is one of the primary ‘location independent’ revenue opportunities.
So this isn’t going to be a get-rich-quick scheme, there’s nothing to sell you at the end, but the idea is to show you what I’ve been tinkering with on the options market and that I’ve been able to make some small (but significant %) profits. (And that you can too)
I’ll explain a bit about Options Trading (it’s not daunting, don’t worry) and then about how to find profitable stocks and what tools you can use to kick things into gear. There’ll be a few links at the end of sites you can check out, sign-up for free online brokers and do some ‘virtual’ trading on your own. (not real money, but it uses the real results from the stock market).
Things might get a bit confusing as we go along, but I made $1,200 last night without lifting a finger so it’s worth you getting a cup of tea, having a good read once or twice, following the links, and if anything doesn’t make sense then either drop a comment or send me an email. If you’re viewing this post via the email subscription or RSS feed, it’s probably better to head to the site as some of the images enlarge if you click on them.
Introduction to Stocks & Options
Late last year I attended a seminar on shares, options and CFD’s (ignore the last one). This piqued my interest so I read a few more books and found that most of the information was readily available for free in books, none of the theories were new or top secret and what wasn’t available in books was available online. I got hold of a good course of DVD’s and CD’s and studied away, eventually starting up a free account and experimenting, reading more books and found that the whole game was about learning, getting some experience, risk management and not putting all your money on the table at once.
It doesn’t matter if you don’t know anything about the stock market, stocks or shares and all that jazz. The words ‘company’, ‘shares’ & ‘stocks’ all represent the same thing, if Ford Motor Company came out tomorrow with the flying car then their share price/stocks/company would increase in value. If their flying car crashed when you drove it then their share price/stocks/company value would decrease.
What is an Option?
So anyway, what are these options I keep going on about? An ‘option’ is based on a stock. An option has three components; time value, a premium and a strike price. Confused much?
Time Value
Like car insurance, you buy an option to last for a set amount of time; one month, two months, six months, a year, it varies. (Consequently the more time you buy, the more it costs) You’re not actually buying the ’stock’, in essence you’re taking out a policy that will give you the ‘option’ of buying the stock at a set price further down the track.
Premium
This is the ‘premium’ you pay for the option, similar to the cost of your car insurance. The backbone of options is that the premium is more often than not only about 10% of the cost of buying the actual stock. (Think about it, $10 stock that you control for $1, if it goes up to $12, you’ve made 100%).
It’s worth jumping in here to give you the textbook definition of an option to help clear things up; “An option gives the buyer have the right, but not the obligation, to buy or sell the underlying stock at a specified price (strike price) until the 3rd Friday of their expiration month (Time Value).”
Strike Price
From above, the ‘strike price’ is the price at which the buyer can buy the stock for. So if you buy an option on a $10 stock for $1, and your stock moves to $15, you have the right to buy that stock at $10 (and here you’d have $5 profit as the stock has moved to $15).
Hopefully you’ve just had a light bulb moment from the above paragraph and probably asked as I did “surely that’s not possible?” I probably haven’t done the greatest job at explaining all of this so head here when you’ve got the chance to read up on it.
Sales Pitch
So if you do a few google searches or even attend a seminar or two, you’ll hear/read a few of those gimmicky sales pitch catch cries to reel you in. Here’s a few I’ve put together that ARE true and should make you stand up and want to get into this for yourself;
Options Trading will take a whopping 15 minutes of your time per day- You can double or triple your money rather easily
- You can profit hugely from stock going down
- You can make money if stock goes sideways (neither up or down)
- You don’t have to know which way the stock is going to make money
Ok that’s the gimmicky sales pitch crap out of the way, and I’m not even trying to sell you anything!
The whole options trading thing is full of strategies, you can; buy, sell, make money on stock going down, all sorts of stuff, but to ease you into it I’ll work through some real examples that I’ve used myself.
If you missed the two screen shots within this post scroll back up and check them out. The first screenshot is of the daily account email I receive which outlines my overall position and the second screenshot is when one of my orders gets filled and I make a profit! If you want to learn some more right away you can google ‘options trading’ or go to one of the many online brokers and sign up for a virtual trading account, I’ve used optionsxpress and they were fine.
In US Options Trading – Part 2 I’ll show you a behind-the-scene’s look at how I find trades (companies), what to do with them once you’ve found them, and how to place trades.
Receive the Twelve Days of Christmas (and Part 2 of Options Trading) delivered directly to your inbox here. If you’ve got twitter it’d be great if you would retweet the article. 
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