Build Wealth On line using Put Option Trading

May 16, 2012 · Posted in Investments 

The stock niche is certainly another one of the numerous ways for you to generate money.

With regard to the stock market place the new very very worthwhile tactic to build up riches is options trading. I generate 15 to 20% just about every month by trading options, more specifically put options.

Generally there are are two different features to put options investment.

There is the facet regarding proper protection on your personal account or obtaining insurance for your stock, and then there is the wealth building, monthly cash flow side aka getting paid to own a stock. Why don’t we have a quick glimpse at both.

Buying Insurance with Put Options

To be the buyer of this put options contract, you will have the “option” to offer a stock set at a certain price until you sell the actual option or perhaps the particular option expires.

Nearly all investors implement puts to protect their account from big movements to the downside and furthermore lock in profits.

For instance, lets say a trader obtained a stock and it increased in price by about $10 per share. This is definitely a really large advance.

At this point the question you will be asking is…must you take profits or perhaps let it ride? Additionally you need to take into account that if you do nothing, your earnings may be erased within minutes with some not so great news. Taking absolutely no action is probably the worst steps you can take within the stock market. What do you do in that situation?

You can acquire a put option with a strike price which is a few prices below the current price of the stock. By using this method, you will be able to sell your stock at this strike price no matter what happens to the cost of the actual stock. For instance, if you purchased the stock at $200 and it increased to $250, you can actually buy the put at $240. With the $240 put option, irrespective of how low the stock goes, you can still sell it at $240! So, if the stock drops to $40 per share, you can STILL sell it at $240, think about that for a second…let it sink in.

Making Monthly Passive Income with Put options

On the other side of this put options coin is how you’ll be able to create wealth by using options through passive income each and every month.

In order that the stock buyer to secure his stocks by purchasing protective puts, he will need someone ready to sell those put options to him.

I make cash every month by simply selling put options against stocks I will be ready to own and often against stocks that I never plan to own.

One of the keys to building wealth with put option selling is always to sell puts for stocks you wouldn’t mind getting and also find stocks which are relatively flat with regards to their price goes. Flat stocks are usually stocks that move at most $3 within a month and also have really low PE ratios.

I have found that I also have a great deal of success through stock trading within the $20 – $30 price range. Anything higher or even cheaper tends to be too risky in my opinion.

I have been investing for over a decade and have done meticulous research on how to build wealth. My primary focus is on strategies that can create low risk residual streams of income.

Want to learn more about starting to build wealth from scratch? Stop by Dale Poyser’s site where you can find out all about different ideas to make residual income and what it can do for you.

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