Sunshine-Empire & EmMax

Strategy 1 - Covered call writing and Naked Put Selling

Assuming you don't already own any stock, you can start off by doing naked put selling. With this strategy, you basically can get paid a commission to buy a stock from someone. With this strategy I would suggest you start off with a margin account. Note, you will need a minimum of $2,000 to open and maintain a margin account. With this strategy you can conservatively make 10-15% per month.

Strategy 2 - Call option buying and Put option buying

Buy a call option if you think a stock is going to go up. Buy a put option if you think a stock is going to go down.

With this strategy you do not need a margin account and you can start with as little as $100 if you find the right stock. With this strategy you can make upwards of 300% per trade!

Strategy 3 - Bird Dogging

This is also referred to as being a property scout for real estate. Basically you do the leg work to find and broker real estate deals. Once you have a contract signed, (for a price) you assign it to an investor/buyer who has the funds to close the deal. For example, let's say you find a motivated seller (let's call her Anne) that has a property worth $200,000. Because Anne is anxious to sell, she is willing to sell the property to you for $120,000. You tell Anne that you would like to buy her property but you just need two months to come up with the cash. Anne says this is fine as she won't need the cash for two months anyway. You draw up a contract with Anne saying that she will sell the property to you for $120,000 and she will not accept any other offers during a two month time frame. You can make the contract official by placing $100 in an escrow account. Another thing you do is place two clauses in the contract. The first clause will state that you can get out of the deal if your business partner or advisor does not support it. This first clause gives you a way out if you can never come up with the money. The second clause states that the contract is assignable. What this means is that at any time during the two months, you can assign/give your rights to the contract to someone else. With contract in hand you find a real estate investor (let's call him Bill) or someone looking for a house.

You tell Bill that you have a deal on a property. The property is worth $200,000 but you have a contract that will allow you to get the property for $120,000. Bill already has a potential $80,000 equity and can keep the property or sell it right away for a nice profit. You tell Bill that you don't plan to buy the property but you can assign the contract to him for $5,000. Because you have done all the leg work and the property has the potential to make around $80,000, this idea would be appealing to Bill and he gives you $5,000, gets the contract and purchases the property. So you made $4,900 on an investment of $100.

Strategy 4 - Tax Lien Investing

With this strategy you can get paid to pay other people's taxes. If someone falls behind on their property taxes, you as an investor can pay the property tax amount and once the person gets caught up, you collect what they have to pay in penalties. In states like Texas, a delinquent person has 6months to get caught up and once they get caught up they have to pay fines of as much as 50%. At least 25% of whatever they pay will go to you. For example, if someone had property taxes of $5,000, they would have to pay about $7,500 to get caught up. If you had paid $5,000 for that tax lien, you would be entitled to $1,250 or 25%. In the worst case scenario if the home owner never gets caught up, you are allowed to foreclose on the property.

So there you have it, 4 strategies that you can do with little money. To be successful in investing you need to have a combination of three things. The three things are knowledge, money, and/or time. You do not need to have all three and you can probably get by with one if you do your homework.

Dale K Poyser has been investing for 11 years and has done meticulous research on various strategies that can add residual streams of income to your life.

Not only does Dale personally practice the methods he writes about, he has also coached many others in these methods to show how easy it is to make money with residual streams of income. You can read more about Dale's strategies at http://creatingresidualincomestreams.blogspot.com/

Labels: Investment, Options, Spare

Futures are basically contracts used to trade an investment instrument for a certain price on a specified date, sometime in future. In non-technical words, it is a bet placed on price of an instrument in future. Such is trading is technically, called 'Futures Trading'. 'Futures trading' is done using 'Futures Contract'. Futures contract is a standardized legal contract that mentions the specifics finalized for trading of futures. It mentions the instrument which traded (either sold or bought), the specified price and a pre-agreed calendar date in future.

Futures trading can be practiced on any of the options, including: trading commodities using futures, trading currencies using futures and trading in stock markets using futures. The futures trading involves two parties i.e. a seller party and a buyer party. Both the parties involved, make an attempt to predict the value of the instrument, in recent future (till a specified date). All these details are mentioned in the futures contract. There is no actual transfer of the instruments rather their price is predicted and based on the prediction money transfer takes place from one party to another.

In case, the expected price is reached on the specified date, the investor earns the profit. But, if there is a mismatch then, it ends in a loss. This kind of futures trading in India is governed by SEBI. This is a high risk involving investment and hence, only experienced professionals are advised to take a plunge into it.

Next, in contrast to the futures, there exists a second type of investment channel termed, 'Options'. More information on basics and options trading is provided in the next few paragraphs.

Options are a type of investment which involves trading of a security, based on a mutually agreed price on a specified date. 'Options' predict the price of the security in near future in comparison to 'futures trading'. This information is gathered from the stock market only. There are two types of 'Options' - one is called a 'Buy' or a 'Call' and the second is called a 'Sell' or a 'Put'.

A 'Call' provides the instrument holder with the right to buy an instrument on a mutually agreed price on the specified date. Contrastingly, a 'Put' provides the instrument holder with the right to sell an instrument on a mutually agreed price on the specified date.

In short, this is a very important type of investment that if done wisely and reap good benefits.

Labels: Future, Introduction, Options

I was recently asked this question by a visitor to my web site.

You may have seen the term "stock options" in the financial section while scanning the news. Or perhaps, you've encountered the term as an employee and were offered stock options in your company. So, what are stock options? Can these options be used to your advantage? Yes! There are two different types of stock options. Let me help you understand the difference.

Employee Stock Option (ESO)

An Employee Stock Option (ESO) is a type of non-cash compensation that is typically issued to management as part of an executive compensation package. Technically, an ESO is classified as a non-standardized option because it has several differences from an exchange traded option. The reason companies offer this type of compensation to management is because it provides management with incentive to run the business well. The stock of a well managed company with good growth potential is likely to rise, rewarding the management team.

Here are some differences between an ESO and an exchange traded option:

1) An ESO is may not be traded. That means that cannot be bought or sold in the open market on any kind of exchange. An ESO is strictly issued from the company to the employee.

2) The quantity of the ESO is determined by the company and is not standardized like an exchange traded option. The strike price or exercise price is usually the price of the company stock.

3) The duration of an ESO varies and it can be many years to expiration, unlike an exchange traded option that has a shorter life span to expiration.

Exchange Traded Option

An Exchange Traded Option is a standardized contract that is traded over the counter on a specific exchange. Standardized means that there is a standard set of rules governing the trading of that exchange traded option. These are the types of options that you will typically only have access to since they are traded on an exchange and available to the public.

1) Unlike an ESO, one standardized option contract represents one hundred shares. So if I bought one Apple (AAPL) option contract, I would actually control one hundred shares of that stock. If I decided to exercise that contract, then I would control one hundred shares of stock for every one option contract I exercised.

2) There are two types of standardized option contracts. You can be a buyer or a seller of an option and each gives you specific rights or obligations. To keep it simple in the example below, I will explain only the concept of buying the two types of options.

A call option gives you the right to buy the underlying asset (stock or future) at a set strike price. It is a right and not an obligation. You pay a premium or deposit for the option contract which gives you the right to own the stock at a set price on or before a set date. When you buy a call option, you expect the price of the underlying asset to go higher in order for the option contract to become profitable. What you have at risk is only the premium that you paid for the option contract. So, in the case of purchasing a home, you would put down a deposit to show the seller you were a serious buyer. If a few days later a tornado destroyed the house, you would lose only your deposit amount and not the full value of the home. I know there are probably ways to get your deposit back, but I wanted to give you a visual.

A put option gives you the right, but not the obligation, to sell the underlying asset (stock or future) at a set price on or before a set date. You pay a premium or deposit to own that right to sell. When you buy a put, you want the value of the underlying asset to go lower in order for you option to become profitable. Buying a put option is referred to as shorting the underlying asset. Many refer to put options as insurance. Recall the example above of the house destroyed by the tornado. If you were the seller of that house, then you would have paid an insurance premium to recoup the full value of the intact house and not the current, lower value of the destroyed house.
The cost to you of rebuilding the house to its former state is the insurance premium you paid and nothing more.

3) An option contract has a determined expiration date on which the option will expire. Option buyers need to exercise (or sell) the stock option before this date. An option which has a long time to expiration is more expensive than an option with a shorter expiration date.

4) An option contract has an agreed price which is called the strike price. The strike is the price at which buyers of call options can buy the stock prior to expiration. It is also the price at which buyers of put options can sell the stock.

My Tips

1) A stock option is usually bought at a significantly lower price than the actual price of the underlying asset, so you don't have to put up as much money to control the same amount of shares as if you were buying the underlying asset. This is one of the reasons why I use options than the underlying asset.

2) Because of the tremendous amount of leverage and the amount of shares you can control with options, you have to be extra careful. There are many components to the pricing of options. Keep in mind that over ninety percent of option contracts expire worthless so if you are thinking of putting your entire account in one option contract, then you might not have an account in the future.

3) The market trend will usually dictate which type of stock option to buy. If the market is in an uptrend, you would look to buy calls. Alternatively, if the market is in a downtrend, then you would look to buy puts.

Trading stock options may sound complicated, but it is much easier than it seems once you master some basic terminology and techniques. All the actual paperwork of the option contract is handled through brokers and stock exchanges. All you have to do is to consult with your financial advisor on whether it's a good time to buy or to sell stock options. It is important that you understand how the system works, so that you manage your risk and don't incur great losses.

I hope this information has helped to answer the question, "what are stock options?"

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Labels: Options, Stock

One of the riskiest trading options around yet is binary options trading. The payout for this kind of option is either a fixed price or asset, or none at all. It's very risky especially for a newbie to try this type of trading. In some cases, investors give back a small percentage of the investment, at times around 5 to 10 percent of the strike price. However, the most basic cases and situations do not call for a refund or return of investment.

To trade in binary options, you must first create an account on binary options brokers online. Major online brokers are currently dealing with this kind of option. After choosing and setting an account, you start choosing an underlying asset to trade. In this event, you can either study different markets for their viability and profitability, or pick one where you're most comfortable trading with if you're an experienced trader. Trading knowledge is very important in binary options so as not to give an unprofitable decision. Study all markets you might possibly handle, and draw their asset values on current trading figures. It would shed a good light if a commodity has a high asset. Make a call option for those with high assets so you can profit when it expires in-the-money. On the other hand, you may still opt for those with lower assets if you feel more attached and hopeful to it, but it'll be wise to purchase a put option for it to also profit from it.

What's left from this stage is to wait for the result of your investment as it reaches the maturity date. At times when a contract expire in-the-money it gets up to 75% profit from it, better than losing and getting no return at all. Binary trading options come in several types, depending on which maturity date will your investment on a contract end.

The most basic binary options are cash-or-nothing and asset-or-nothing. Both of these options have the same processes of profitability, but they differ in one aspect. The latter option opts for a strike price while the former would rely on the price of the asset upon the end of the contract. Both of these options would payout if the asset price or strike price gets higher towards a maturity date. When they don't get higher, the contract is lost. There are also other types like the one-touch and no-touch binary options that would necessitate first a level of determination. The latter, when that determined level is reached, would hand out pay. The case is inversely different for the former.

Labels: Binary, Options, Trading