In the previous article you were introduced to the idea that you are making one of the single biggest mistakes you can make with your trading
The single biggest mistake you are making is not self managing even a small porfolio of short term investment ideas or trades
The usual obstacles are;
- Not enough capital to trade more than 1-2 stocks at a time
- Not enough time to research opportunities
Thankfully these two major hurdles dont have to be obstacles any more and it is a simple adjustment to make to switch from more traditional trading or investing and moving over to stock options
This shift to stock option will remove the old capital intensive way of trading and free up your capital to build a portfolio of stocks and fix the big problem of having all your eggs in one basket
New to Stock Options? This article will most definately help
It is a simple adjustment to make and that is to switch from more traditional trading or investing and moving over to stock options
I also want to make it clear that this is NOT binary options
What are stock options?
While the following description of Stock options is not quite accurate it does help to introduce to you the logic and the idea behind them which is comparable to many things you are likely already familiar with
Stock options can be considered similar to a deposit which you are likely already familiar with in many different areas of your life
When buying a stock option in the hope that the stock will increase in value you can essentially reserve 100 shares and decide if you want them later on in the month or year depending on how long you reserve them for
As such you place a deposit (aka call option) at a set agreed price for a set agreed amount of time
Should the stock price rise – your option will also increase (proportionally) in value
You can cash-in (sell it back to the market) your now increased in value deposit (option) without having to wait until the agreed date (expiration)
Here is one of the best bits…
Should you be wrong and the stock does the opposite and move lower in value – your deposit (option) will of course be proportionally worth less
BUT – you will never lose more than you deposit no-matter-what.
Yup – that is correct. The stock can go to zero value and you will Never lose more than the deposits (options) initial value – EVER!
Stock Options Check List
Bellow is a list of things you need to know to help you with your first options trade. There are many ways to buy & sell and mix-n-match them in combination with each other to give you all sorts of fancy sounding names
This Stock Options Check List will help you replace the more traditional buy or sell short stock which is likely what you are most familiar with and likely doing already to place your trades
Ready? Good – here we go
Which way is the stock going to go next?
I would assume that you already know how to pick a stock and can figure out which way its going as to which way you think it will continue to go next to place your trade
When you have that figured out you need to replace what you would normally do with stock options
1 – Calls or Puts?
Calls = Up & Puts = Down
I like to think of it like making a phone call – you call somebody up and when you finished you put the phone down
- If you are bullish on a stock you would BUY a CALL
- If you are bearish on a stock you would BUY a PUT
*Notice that in both bullish & bearish assumptions you BUY an option
2 – Which strike price?
Lets just keep this simple – I like to use 1-strike out-the-money in the premium stock alerts
Lets break this down
- A strike price is the dollar amount you agree to reserve your shares at
- Out-the-money refers to where the strike price is compared to the current stock price e.g. If the stock is trading at $50 and you want the stock to go up and you buy a call at the strike price of $51 – this is out-the-money as the stock price will have to move up and above $51 (which is when it turns in-the-money)
3 – How much time do you need?
The way I trade is short term in that I swing trade and my positions last on average 7-to-10-days. If Im wrong I like to have some extra time in there so I can “get a do-over” or a “go-around”
Typically 30-to-45-days gives me plenty of time to be right IF Im initially wrong
I will usually start with the nearest Monthly Option that has around 30-to-45-days before it will expire
If you need more time you buy more time – I will rarely buy less time on my options even if I dont need it – remember the back up place – give yourself time to be right
That is all
Now understand that there is a whole lot more to the world of options – this isnt even a primer on options – but it is all the information you need to replace your long or short stock trading and replace them with options and ultimately you will Never be stopped out EVER again.
I’ll see you on the other side
p.s. A quick reminder of what you should have got from this article – and if you haven’t get in touch and I’ll fix that for you
>> The Solution – Stop putting all your eggs in one basket and use a significantly more capital efficient method of trading with stock Options and nurture a stock options portfolio
>> The Real Secret to Trading Success – Developing a portfolio of stocks means you will never be reliant on being right and hoping you pick the right stock – A portfolio allows you the luxury of not stressing about being right & starting to manage your stock trading as a business. This is the single method that is responsible for all my results ( remember 80.4% win rate?) and all my student success stories
>> On-Demand Training Course – Some of the ideas I mention may be new to you and to help with that there is a full step-by-step training to help you apply the solution and use the secret effectively. You can access the training here – Or if you require a more detailed 1-2-1 mentorship – Click Here
>> Daily Commentary – I like to send you a daily commentary of what I think will happen in the markets along with what stocks Im looking at as well as practical examples of how I find stocks to trade
>> Quick Start Strategy – I’ll show you what I trade – How I trade – When I trade – All broken down so you can follow along
>> 20-minutes – The best part is that most of the time applying the solutions I mention takes around 20-mins and certainly less than 60-mins per day if you want to spend a little longer
>> Done For You Research – Need some help with the stock research? I send out a daily stock alert which outlines exactly what Im trading for that day – You get sent 1-stock alert per day so you can follow along
Still need a little more help?