Covered Call Options - Option Trading Software - Option Trading Research 619

By: optionstradingdomain

When an investor is less bearish the strike prices used should be closer to the current market price of the stock and the strike prices should be closer together. Whether you're planning to start a limousine business or expanding one, sufficient and on-hand capital is essential. Why? With the right to sell shares at higher prices, investors enjoy additional profit. For example, sell $500 Calls on Google (GOOG) with 1 month to expiration and buy $500 Calls on Google (GOOG) with 6 months to expiration. A certain option may only be executed or as traders more commonly say, exercised anytime before its expiration date. The money does increase and the compounding effect ensures that the interest is also paid interest. This provides you with the option premium while your maximum risk is strike price of the option minus the premium received. Investing in the modern day world can be mind boggling to the average Joe investor. A call option is a contract which allows the owner to buy 100 shares of stock, or take a long position on it before or after the expiration date, whereas a put option is a contract which allows the owner to sell 100 shares of stock, or take a short position on it, before or after the expiration date. Restoration is often a major part of the valuation and can cost a lot of money. The Long Put is a popular strategy because of its simplicity and is used by investors who want a leveraged and limited risk method to participating in an expected decline in a stocks price. You may want to consult a certified financial planner before making investments. This way if one investment shows poor results, it will not show substantial effect on the over all performance of your portfolio. This is a significant advantage for investors with limited investment funds and yet can participate in investing based on the growth and fall of these stocks of companies that interest them. The success of this strategy will depend on 3 conditions:. It allows the investors to deposit a portion of their income into tax deferred brokerage account. You work hard for your money and you want your money to work hard for you, so understanding your financial options is crucial. Short Straddle: This strategy is implemented by simultaneously writing a put and a call option on the same stock with the same strike price and the same expiration date. First of all, one should know that an Option is a contract, which gives the owner the right to buy or sell shares of stock ( or an asset) at anytime before or on the expiration date of the option. Basically, any item that can increase in value with the passage of time can be looked at as an investment. Advantages of Options Trading vs Common Stock InvestingFor example, if you only had $500 to invest and you want to invest in Google Stocks. As long as the price of Google (GOOG) at expiration in one month is trading above ($500 (15 + 16) = $469) and below ($500 + (15 + 16) = $531) you have made a profit. Your max risk scenario would only occur if the price of the stock went to $0. Buy a long-term Put Option: The advantage is getting more time for the stock to decrease in price; however, there is more money at risk since you must pay a higher premium for Options with longer durations to expiration. The greater the bearishness of an investors forecast, the further out of the money and further apart the strike prices should be. You buy September 500 Calls for $16 (you have $1000 so you can afford 1 contract (sold in 100 board lots). The option call which you purchase at $50 for google is now worth $60.Therefore, you would have made. For example, sell $500 Calls on Google (GOOG) with 1 month to expiration and buy $500 Calls on Google (GOOG) with 6 months to expiration. If you have other great idea or information that you want to share with me and the other readers, why don't you drop me an email to keith@bewarrenbuffett.comMore articles available at
-->
Article Source: http://www.articlesnatch.com
About the Author:Learn more about Stock Options Trading Option Trading Software Option Trading Research