The New Sell and Sell Short: How To Take Profits, Cut Losses, and Benefit From Price Declines

April 9, 2011 by  
Filed under Books

Product Description
A detailed look at one of the most underestimated aspects of trading-sellingIn The New Sell and Sell Short, Second Edition, Dr. Alexander Elder explains how to exit a stock at the right time and how to initiate a short position to profit from a stock that is showing weakness. Often overlooked, selling properly enables a trader to cut losses and maximize profits. Moreover, short selling in a weak market can generate big profits and should be a part of every tr… More >>

The New Sell and Sell Short: How To Take Profits, Cut Losses, and Benefit From Price Declines

Online Stock Market Trading – Stock Option Trading Basics

August 12, 2010 by  
Filed under Option Trading

Trading in stock options is not recommended for novices to the stock market. Those uninitiated in the stock market will likely sustain losses. It is recommended that you educate yourself first and start out with the basics. This way you will be able to build up knowledge and gain competency. Stock option trading can be an effective investment method if your long term goal is to remain active in the stock market. Stock Options ExplainedA stock option is not the same as a stock. It is important to understand the difference. Stock options give you the entitlement, in the form of a contract, to purchase or sell the securities or commodities of a specific stock. The contract specifies an established price and period of time in which the transaction must be completed. You are not trading for the stock. You are trading your rights for securities or merchandise. Stock options give foremost investors additional advantages in obtaining favorable returns. Investors commonly use stock options for three purposes. These intents are to avoid price declines, provide insurance against a future purchase price and future stock price speculation. Stock options fall into two categories. The first is call options. This allows investors to purchase underlying stocks. The second is put options. This permits investors to sell underlying stocks. Exercising OptionsYou can exercise purchase or sale of a stock you hold stock options on at time prior to or on the expiration date. This permits the investor to trade the stock for a fixed price no matter if the current market price for that stock is above or below the fixed price. In this manner you can buy or sell stocks where you believe the price may rise or drop beyond your desired limits. This provides an element of insurance on your investments. Many investors trade options without any intention of ever owning the underlying stock. How to Trade OptionsPricing can be highly complex. There are two elements, however, that pricing is based upon. Firstly, the price of the underlying stock and, secondly, the time that remains in the contract. The option price is relative to the price of the principal stock the option accompanies. A high demand for a stock will cause the option price to increase. A low demand for the stock will cause the option price to drop. The time remaining in the contract also establishes the price. The option price may decrease as time runs out in the contract. This is because the option may become less advantageous over time to purchase. There are multiple trading strategies that investors employ with stock options. You should become familiar with the various methods prior to attempting to trade stock options. Expert consultations are recommended with established professionals who can provide you with the proper training. Stock option trading for experienced investors can be powerful means to make profitable transactions. It takes time and knowledge to commence trading in stock options. To do otherwise, may expose you to substantial risks.

Find out more about trades comparison between option and future contracts as well as learning more about trading online with foreign exchange when you visit http://www. learningstocktrading. com, the premier resource portal on stock trading

Options Trading for Beginners: Making More of Your Money

July 21, 2010 by  
Filed under Option Trading

Options trading is an investment vehicle for experienced investors, who track their investments proactively. It is not a suitable vehicle for investors looking to maintain assets without direct management, as it’s very much a timing related purchase and float. Options trading is an excellent technique for using financial leverage to make bigger purchases.

A very simple example of an options trade would be this: If you’re selling a commodity worth $100,000 (say 1,000 shares of a stock worth $100 per share), and a prospective buyer likes the price, they can offer to pay for an option to buy all of those commodities, while spending the time researching other investments. Say, for example, they’re offering you $1,000 to hold that price for them while they gather the rest of the funds, which they say will take three months.

When three months passes, they either pay the remaining $99,000 for the shares of the stock, or forfeit the option. If the stock goes up in price to $110 per share from $100, they can either buy the stock, or sell the option to someone else for the difference between the old price and the new price. Either way, the person holding the option stands to make a tidy profit.

Options trading has its own set of terminology, which we’ll get into a bit later, but the basic premise is this: You buy an option to purchase a stock or commodity at a given price; the option expires after a given time period (American style options trading), or the option must be exercised on a specific date (European style options trading).

There are two principle types of options that are traded. Calls increase in value as the stock price rises, and puts increase in value as the stock price declines. (There’s a lot of fiscal mathematics behind both of these, but the layman’s explanation will suffice. ) In most cases, options are sold to other investors just before they expire; most options traders don’t end up holding shares in the stock they have options for; the options are bought, sold, liquidated and transacted before their expiration dates. It is possible to have both call and put options on the same commodity or stock; this is a “straddle” strategy.

Options trading is not a casual investment strategy; it’s a strategy used by people who are investing as their profession, or who intend to manage their own wealth directly. The benefits of options trading is flexibility, coupled with (in the case of put options) a bit of a countercyclical strategy for bear markets.

The key to options trading is market research on specific stocks; an options trader will be researching stocks that are either slated for a price spike (call options) or are likely to undergo a price decline (put options). How quickly these options express themselves is a measure of market volatility, and most options traders will try to take a neutral position – they’ll put in put and call options to cover both directions, and to cover themselves against broad market trends.

Options arbitrage is a lower risk strategy done by floor traders, and can be short term profitable, with good liquidity. The aim is to swap options with other traders before certain factors influence the market, or to get rid of underperforming options while still getting some profit out of them. Options arbitrage is perhaps the best place to start in options trading for a novice.

Thornburrow Craig is a recognized expert in his field. You can get more advice on options for free trade and the basic strategies of trading on http://www. optiontradingsuccess. com