Stock And Options You Can't Have One Without The Other

By Naresh Karamchetty


An awesome feature of stock options is that they let you profit in any market. You can profit when prices are going up, when prices are going down, and also when they remain stagnant. Even in a volatile market, options let you ride the up-and-down roller coaster to your advantage.

Options are not strictly ways to speculate and make a quick buck. Options are also used by professionals to hedge risk and enhance profits from positions in the underlying stocks.

A good way to think of options trading is to imagine a trip to Las Vegas. First of all, for best results you should only use money that you can afford to lose. Options trading can require making decisions during the "heat of the moment" and you will make those decisions with a much clearer head if your food money is not also riding on the outcome.

Buying short-term options is similar to playing slots or roulette -- you will have fun doing it and you always have a chance of hitting it big. But you must also recognize the odds of success are the steepest in the game. Even the pros lose their bets buying short-term options more often then they win.

Fortunately, there are games in a casino where with some skill and a little luck you can win over the longer term. Blackjack (twenty one) is an example. If you can count cards (and prevent the casino from finding out that you are, you can make a handsome profit. In the options game, correctly analyzing stocks and their charts is a way to tilt the odds in your favor, similar to counting cards.

You don't have to be a floor trader or a fund manager to put this to work for you. No matter what your background-whether you are in construction, teaching, civil service, sales, or office work-you can successfully trade options and earn a great income.

In order to be successful with stock option trading, not only must you pick the correct stock and direction (up or down) but you also must pick the time frame for the stock to move. That's what makes option trading so difficult AND so profitable when you get it right. If you're right about the direction but off by a few days or weeks on the time frame, you lose.

Stocks don't have to go up in price for you to make big money from options. You can profit just as easily when stock prices go down. In fact, substantial profits have been made from buying put options, which increase in value when stock prices fall, thus giving you a profit.

Naresh Karamchetty is a software engineer by day and a Renaissance man at night. To find out more about him personally, visit this site: Engineer Dancer (http://www.engineerdancer.us/). Or to see a great site he frequents go here to find out some things about cheap stock trading (http://www.learnstocktradingsecrets.com/specialreport.html).