Posts Tagged ‘Options’
How To Start Online Trading Stocks And Options Succesfully
Posted by admin in Preferred Stock on January 25th, 2010
Online trading stocks and options is something is done by many as a professional job. Some working for stock brokerage firms others set out to be a online discount brokers. But trading stocks on the stock market is not necessarily for the professional trained stock broker anymore.
More and more people try stock trading online as a means of earning some extra money or even turning it into a fulltime living. Some earn a comfortable income and others making a lot of money from doing this. So what is their secret, most people would be asking?
First of all, there is no real secret to online trading stocks and options, it is a matter of knowing what to do and which stocks to pick and sell at the right time. Obviously there is the option of learning how to play the stock market, by reading a lot of books and doing your research online.
A lot of people may not have the time to do this or are financially in the position to have somebody trading stocks on there behalf can use one of the many stock brokerage firms or if you prefer you can use one of the many online brokerage firms. But unfortunately not many have the spare cash for this, let alone enough money to buy stocks in first place.
So what are the alternatives you may be asking. Maybe you have heard of stock market timing software, which is just one of the many names it comes under. It is also known as stock market prediction software or day trading software etc.
This software helps you to choose the right stock at the right time and also tells you when to sell again. This kind of trading software is also used by the top brokerage firms around the world. These firms often employ the elite software technicians, often called the Geeks of the computer software world.
It is often these geeks that eventually start for themselves and further enhance the software in their own time and become very wealthy from there own creations. Some good examples are the creators of doubling stocks and the day trading robot.
Sometimes top stock broker consultants who are fed up working too hard and making all the money for there firms, decide to leave, taking all their knowledge with them and invest their time and money in creating their own software. Some good examples are fap turbo and stock assault 2.0.
Making money with the stock market doesn’t have to be difficult but if you don’t have the time to learn about stock market trading , nor have the extra cash to pay for brokerage fees then stock market timing software is a good option to start online trading stocks and options successfully.
Tags: Online, Options, Start, Stocks, Succesfully, Trading
Futures Options Vs Stocks Options
Posted by admin in Preferred Stock on January 11th, 2010
While we may be talking about how profitable and consistent money can be made by selling options, some traders have popped the most fundamental but yet critical question on what type of options to sell. Our context here refers to stock options, ETFs options or futures options.
Most options sellers may be familiar with the concept of selling options against equities which can include stocks or ETFs, but selling options against futures contract may be a totally new ground to them. The basic principles may remain generally the same, but one must be aware of certain aspects which could make one more appealing or fearful than the other.
ETFs options work very much the same as stocks options. They are treated like just normal stocks except that while stocks can crash to zero value, the possibility of ETFs crashing to zero is extremely small, which I will not commit to saying zero. Something very drastic must have happened to the market to cause this to happen since ETF like SPY comprises of some of the strongest companies listed in the exchange. And for that reason, I generally prefer to sell put options on ETFs. Of course, that’s just my preference and I believe you have yours too.
I have heard of some traders who did options selling on stocks and I mean on big companies which failed. Depending on the risk management approach that was taken, disastrous to the trading account could have been avoided or minimized then.
The risk associated with selling options on stocks may therefore be perceived as relatively higher and thus lead to a possibly higher margin. Premiums obtained from selling stock option and future options differ. Margin requirement from selling stock options can be 10, 20 times higher than the premium collected while that for future options can be just a few times higher. The return on investment is thus viewed as better for doing options selling on future contracts.
Strike price consideration is also a critical factor when deciding between stocks and futures options. For futures options, it is possible to sell very far OTM options and yet collecting a reasonable amount of premium for it. However, for stock options, one would have noticed that after just a few strikes OTM, the premium to a miserable amount which might not be worth the risk to do so.
With a lower margin and possibility of getting a substantial premium for very far OTM options, futures options seemed a much choice than stocks options at this moment. However, one must be aware that futures come with contract dates which they mature or expire. They are unlike stocks or ETFs which one can hold upon assignment on the expiry dates. Risk management for futures and stocks options selling hence differ. Futures contracts like the E-mini S&P (symbol ES) also come with different contract dates, e.g., the September, December contract etc. ES options expiring in the months of October, November and December are associated with the underlying future contract which expires in December. Such knowledge can be important to a trader who is trading these options though the price difference between the various future contracts can be small.
Hope this article has been helpful to you if you are thinking of embarking on the futures options selling track.
Good luck!
Tags: Futures, Options, Stocks
Stock Options – What you Need to Know
Posted by admin in Common Stock on January 2nd, 2010
Call and What?
An option is a “legal financial contract”. The holder has the right, but is under no obligation, to accrue or sell a predetermined number of stock shares. This is to be done at a price that has been predetermined which is called a strike price. It is also to be accomplished on or before a specific date.
There are just two basic types of stock options, the European and the American. An American stock option is a contract that can be exercised between the purchase date and the expiration date.
Each stock option is designated by the following:
• Name of the stock
• Strike price
• Expiration date
• The premium that was paid for the option plus the broker’s commission
Two of the most popular types of stock options are Calls and Puts. If you own a call you have the right but are not obliged to buy a stock at the strike price at any time before the stock option expires. If an option expires, it is useless and worthless.
The other most common stock option is the PUT. This is almost the exact opposite of a Call. If you own a put you have the right, but are not obliged, to sell a stock at the strike price any time before the expiration date of the option.
How in the world do people trade these stock options? Stock options traders will rarely exercise their option and purchase (or sell) the underlying security. Instead, they will buy back or sell the option. This saves on commissions.
Options officially expire on Saturday following the third Friday of the month in which the option expires. Shares of stock have a 3-day settlement interval but option settle the very next day. The option has to be traded by Friday in order to settle on Saturday.
Another thing you may hear about with regards to stock options is volume and open interest. Volume is the number of contracts that are traded on any given day. The open interest figure is the number of contracts that are outstanding at any given time.
For those who are curious, a Put-Call theorem has been formulated which defines the following relationship for the price of puts and calls:
P=C-S+E+D
• P= the price of the put
• C= the price of the call
• S= the stock price
• E= the present value of the exercise price
• D= the present value of the dividends
An ordinary investor will see a violation of the put-call parity from time to time. This is not a time to instantly buy, but it is a reason for you to check your quotations for timeliness because as you will probably see at least one of them has expired.
If you want to get into the stock option trading business, then you should probably start by writing covered call option for stocks that are currently trading below the strike price of the stock option.
There are many places on the Internet if you do a search for stock options where you can set up an account for just a small amount of money. My advice to you is to do your research well and only put up as much money as you are willing to part with.
Tags: Know, Need, Options, Stock
The Ultimate Stock Options Trading Strategies
Posted by admin in Preferred Stock on November 18th, 2009
Are you interested in option stock trading? Then you must be interested in option stock trading strategies. To understand stock options better lets see a simple dictionary definition.
Strategy can be defined as a skill in managing or planning, especially by using stratagems. The words managing or planning using stratagems to achieve a particular end or objective is quite useful in our desire to apply this definition to the investment market.
The ability to pick the right stock or group of stocks is vital. Equally vital is the art of making the most possible return on the chosen investment possibility. This is where you need your strategy or game plan. So with the right opportunity but wrong strategy can still lead to risky investment, loss of profits an capital. These underlies the fact the proper knowledge of option stock trading strategies are important.
The desire of the stock investor, his style and depth of research and the personal preference of the stock broker would all contribute to the final selection of stock options would prefer and consider necessary. The process of selection involves the data that are available and preferred by an investor in options stock trading. The sources of data are wide and usually consists of charts, indicators, news, reviews, tips and oscillators.
Each investor in option stocks trading has his own preferred stock choosing process. Each would determine how he undergoes the selection process. Once the selection has been made viable option stock trading strategies would have to be considered and a strategy selected.
A stock option investor has some desired expectation for any opportunity chosen and implemented. A trading strategy that maximally suits the desired expectation should be selected.
Obviously the best strategy would be one that achieves the desired level of returns while still offering the least amount of risk and best protection on investment possible. Every option stock trading opportunity is unique with different variables attached to it and thus would require that each opportunity should have a different strategy that best suits the particular strategy. An obvious popular option stock trading strategy is the selection of stock that is believed to be on the rise, or that is expected to increase in price.
This directional play allows investors to profit as the face value of the stock or portfolio goes up. Each investor should take time to select his stock or trading opportunity and the best available strategy to execute it.
Tags: Options, Stock, Strategies, Trading, Ultimate