- Welcome Guest |
- Publish Article |
- Blog |
- Login
Making money in options does not come without risk, but if done well can really make a positive impact on your life and standard of living.
Making Money in Options: Increasing Your Ability to Earn with Limited Capital Have you ever heard the phrase, it takes money to make money? When it comes to the stock market and investing it is the gospel truth. The problem is unless you come from a family blessed with enough wealth to invest, odds are you will never have enough capital to earn enough money to live on as a stand alone income stream. How then can an average person like you or me break out of the low-capital middle-class trap?
One potential answer is by making money in options. While outright ownership of income producing assets such as stocks and bonds is always preferable to trading options contracts - the facts are that unless you make occasional leaps ahead you'll never build enough capital in your lifetime to own anything that produces a stand-alone living income. One way to make leaps ahead and build capital is to use option contracts to increase your buying power in the market. The technical term for this type trading is called using leverage.
Using Options to Create Leverage to Increase Buying Power in the Stock Market Options contracts convey the right to buy assets, rather than conveying outright ownership of the assets themselves. As a result an options contract holder buys control of shares at a discount to the price of the actual shares themselves. This is how an average person like you or me can create enough buying power to make money in options trading.
Consider a simple example. Today I might be able to buy shares of Apple for around $340 per share. I don't know about you, but I'd have a hard time putting together the $34,000 of capital I would need to own 100 shares of Apple stock outright. How might I still profit from controlling 100 shares of Apple without actually owning the stock? The easy options trading answer is to buy one call option contract on Apple shares with a strike price of $340. Today that would cost me $8.50 per share, or $850 in total capital invested. I don't know about you, but that is a much more manageable figure than $34,000. Making money in options requires more knowledge than this simple example though. Reading a guide to trading options will help prepare you for your first trades.
Article Views: 1632 Report this Article