How To Triple Your Stock Market Returns Using Options

On the other hand, if you are correct, your profits may well exceed three times the amount you would have made with just a straight investment in the stock. If you miscalculate on either of these values, you will either break even, or loose. The key to using options to increase your stock market profits is that you must be able to correctly predict both the direction that the stock will move, and the approximate time frame in which the move will take place.

More specifically, stock options are financial instruments that come in four varieties: Long or Short positions on a Put or Call. An option gives the owner the right but not the obligation to purchase something.

Long means a person purchases a Put or a Call. Short means a person sells or ?writes? a Put or Call. Option writing is a more advanced topic so this course will focus on the more common long or option buying and the following descriptions assume all positions are long.

A Put is the instrument that profits when the underlying stock declines in price. When the stock goes down, the value of a Put goes up. A Call is the reverse of a Put. The value of a Call goes up when the stock increases in price.

As you can see, if you expect the stock price to go up, you buy a call. If you expect the price to go down, you buy a put. There are two more parts to an option that need to be covered. First is the expiration date.

All options have a date in which they expire or become worthless. Remember that an option gives the owner the right to purchase something. This right is for a limited amount of time. Depending on the stock, different options might be available for several consecutive months into the future, or there may be a couple of months skipped. The specific day of the month that an option expires is always the third Friday of the month, unless it is a holiday, in which case the expiration is on Thursday.

The second element is the strike price. This is the price that the option will be exercised at. Again an option is the right to buy something, and the price at which something is bought is the strike or exercised price. Depending upon the option, these prices may be incremented by $2.50 up to $10.

This all adds up to a lot of choices when it comes to buying an option. Calls or puts plus different expiration months, and multiple strike prices within each month is a lot of different decisions.

This fact my limit your trading opportunities or may result in a large price spread between the bid and ask prices. With the abundance of choices, the number of contracts traded for a specific option can be small for a stock that is not particularly popular in the news.

Many investors have found such patterns and are making excellent profits by carefully selecting the right stock options. If you can identify certain situations that will influence the stock price within a defined time period, you may be able to use stock options to triple your returns.

Common Manipulations Of Consumer Investors

Dont be scammed out of your money read this article and avoid the pitfalls. The process of manipulating potential investors to scam them out of their money has followed the stock market into the 21st century and online. The process requires a lot of misinformation out there regarding investing in the stock market and in reference to specific stocks.

This has enticed many people to give investing a try even if they have no idea what theyre doing. Online brokerages have revolutionised the investing industry.

Pump And Dump 1.

In this scam, you are misled about the projected earnings and growth of a company. Uninformed investors purchase the stock. The price tends to rise, and as it does, the original scammers sell the stock off to new uninformed investors and take the profits. Once all the hype drives up the price high enough and the accumulation pressure disappears, the stock crashes and the investors lose money.

2. Avoid Penny Stocks

Penny stocks are stocks less than $5. 00 in value. The reason they are so low is because the company is probably going bankrupt. To avoid the majority of these scams, avoid investing in penny stocks. The hype associated with pump and dump scams is similar between scams. The fake press releases and research reports always tout the given company as being on the verge of a world changing technology, cure for a disease or fantastic new product. The focus is always on the glorious future of the company, but very little information is given about the current status of the company in question.

3. Rumors

The second type of stock market scam is characterized by rumors and traders tricks. Manipulations of stock price can be achieved in subtle ways. Money managers have the ability to start rumors about stocks that they would like to move without paying a large price. The rumor works to lower the price of the stock and create liquidity in that company (TM)s stock. The rumors run unchecked and spread through the market like wildfire.

For example, if a money manager wants to purchase some stock in Company A, they can start a rumor that the company is on the verge of bankruptcy. This lowers the price of the stock and allows the manager to purchase it at the desired rate. This works in the opposite way as well. If the manager wants to sell stock for Company B, a rumor can be started about an emerging invention from that company in order to inflate the stock price. These subtle attempts at manipulation can be the hardest for investors to spot, and therefore the most difficult to avoid. Since rumors are part of the business of the stock market it is hard to track down where the rumors started.

Additionally, there is no paper trail to track down the money managers who practice this sort of manipulation. Fortunately, these inflations or devaluing of stocks are very short lived. Within a short period of time the rumors are proved untrue and the stocks bounce back to their true value. These schemes fortunately never have any long term impact on the market. Maintaining a long term investment focus of owning good companies for long periods of time will offset any of these manipulative rumors.

Manipulation 4.

Having a diverse portfolio of stocks can surely save you from losses that would otherwise hurt you financially. Cheaters and manipulators exist in every industry, and are especially concentrated in an industry that is full of money like the stock market. If you want to play with the big boys, you have to be able to take a little bit of risk when you invest.