Buy Calls to Lock in Opportunity
A beginning investor and trader may have great ideas but not much money. How can someone who understands the fundamentals and technical aspects of the market profit without a lot of cash. One way to profit from stocks when you do not have a lot of cash is to buy calls to lock in opportunity in the stock market. A common bit of wisdom for beginning investors and traders is to invest in and trade that which you know. For example, folks working in medicine, pharmacy, and nursing will have more insight into new pharmaceuticals than the average investor. Mechanics and auto dealers will have better insight into the auto industry. Oil drillers, refinery operator, and folks working offshore for big oil will have better insight into the energy market than the rest of us. But, what do you do with lots of good ideas and very little cash? Buy calls to lock in opportunity as you see it.
Buying Calls
How do stock options work? How do calls work? Calls are options contracts in which the buyer pays for the right to purchase a stock, commodity future, or currency at a set price, no matter how high that price might rise. He pays his money and is under no obligation to purchase the stock in question and will only do so if the stock price goes up sufficiently the make the transaction profitable. But, remember, our new trader in this instance is not wealthy. Here is where he buys calls to lock in opportunity instead of buying the stock. First of all the trader will look for inexpensive calls, calls that are barely “in the money.” These are call contracts which the market in general believes will not be profitable. The market prices these accordingly so they are cheap. Also remember that our hypothetical investor and trader has a great deal of insight into the stock in question. He sees something that the market in general has overlooked. If his appraisal is correct the market will see the same thing in the near future. When that happens, the stock price will rise significantly and the value of the options contract will go up with the stock price. The options buyer will have purchased a contract for pennies and find that it is worth dollars. This also works for a stock that is likely to go down in price. When to buy puts on a stock is when your expertise tells you that apparently stable stock is about to go into a tailspin.
Profit as You Buy Calls to Lock in Opportunity
Remember that our hypothetical investor, trader, and expert in the stock in question is not rich. So, how does he come up with the money to buy the stock in question? He does not have to. All he needs to do is sell his call contract. The call contract will typically go up in price as much as the stock rises. In an ideal situation a stock rises by twenty or thirty dollars and so does the value of a call contract.
2. A beginning investor and trader
may have great ideas but not much
money.
How can someone who
understands the fundamentals and
technical aspects of the market
profit without a lot of cash.
By www.Options-Trading-Education.com
3. One way to profit from stocks
when you do not have a lot of
cash is to buy calls to lock in
opportunity in the stock
market.
By www.Options-Trading-Education.com
4. A common bit of wisdom for
beginning investors and
traders is to invest in and
trade that which you know.
By www.Options-Trading-Education.com
5. For example, folks working in
medicine, pharmacy, and
nursing will have more insight
into new pharmaceuticals
than the average investor.
By www.Options-Trading-Education.com
6. Mechanics and auto dealers
will have better insight into the
auto industry.
By www.Options-Trading-Education.com
7. Oil drillers, refinery operator,
and folks working offshore for
big oil will have better insight
into the energy market than
the rest of us.
By www.Options-Trading-Education.com
8. But, what do you do with lots
of good ideas and very little
cash?
By www.Options-Trading-Education.com
9. Buy calls to lock in
opportunity as you see it.
By www.Options-Trading-Education.com
11. How do stock options work?
By www.Options-Trading-Education.com
12. How do calls work?
By www.Options-Trading-Education.com
13. Calls are options contracts in
which the buyer pays for the
right to purchase a stock,
commodity future, or currency
at a set price, no matter how
high that price might rise.
By www.Options-Trading-Education.com
14. He pays his money and is
under no obligation to
purchase the stock in question
and will only do so if the stock
price goes up sufficiently the
make the transaction
profitable.
By www.Options-Trading-Education.com
15. But, remember, our new
trader in this instance is not
wealthy.
Here is where he buys calls to
lock in opportunity instead of
buying the stock.
By www.Options-Trading-Education.com
16. First of all the trader will look
for inexpensive calls, calls that
are barely “in the money.”
By www.Options-Trading-Education.com
17. These are call contracts which
the market in general believes
will not be profitable.
By www.Options-Trading-Education.com
18. The market prices these
accordingly so they are cheap.
By www.Options-Trading-Education.com
19. Also remember that our
hypothetical investor and
trader has a great deal of
insight into the stock in
question.
By www.Options-Trading-Education.com
20. He sees something that the
market in general has
overlooked.
By www.Options-Trading-Education.com
21. If his appraisal is correct the
market will see the same thing
in the near future.
By www.Options-Trading-Education.com
22. When that happens, the stock
price will rise significantly and
the value of the options
contract will go up with the
stock price.
By www.Options-Trading-Education.com
23. The options buyer will have
purchased a contract for
pennies and find that it is
worth dollars.
By www.Options-Trading-Education.com
24. This also works for a stock
that is likely to go down in
price.
By www.Options-Trading-Education.com
25. When to buy puts on a stock is
when your expertise tells you
that apparently stable stock is
about to go into a tailspin.
By www.Options-Trading-Education.com
27. Remember that our
hypothetical investor, trader,
and expert in the stock in
question is not rich.
By www.Options-Trading-Education.com
28. So, how does he come up with
the money to buy the stock in
question?
By www.Options-Trading-Education.com
29. He does not have to.
By www.Options-Trading-Education.com
30. All he needs to do is sell his
call contract.
By www.Options-Trading-Education.com
31. The call contract will typically
go up in price as much as the
stock rises.
By www.Options-Trading-Education.com
32. In an ideal situation a stock
rises by twenty or thirty
dollars and so does the value
of a call contract.
By www.Options-Trading-Education.com
33. If this was a call that our new
investor and trader purchased
for pennies his reward is
substantial.
By www.Options-Trading-Education.com
34. This is an ideal example of
how to buy calls to lock in
opportunity in trading stocks,
trading gold options, or
trading foreign currencies.
By www.Options-Trading-Education.com
35. For more insights and useful
information regarding options
and options trading, visit
www.Options-Trading-Education.com.