Most likely, you’ve considered stocks, bonds, and mutual funds for your portfolio.
Because of the common knowledge of these investments, investors are more apt to use them.
However, the goal of any investment is to make money-these types of investments carry a comfortable amount of risk, but do not carry substantial capital gain potential.
Other markets carry virtually unlimited potential for profit yet carry demanding risks; they may contain risk too high or depend on too much technological knowledge for the average investor. In fact, only a small number of knowledgeable specialists can participate.
The Options market is one such investment platform.
What are Options?
An Option is a contract providing you with the right to execute a stock transaction, to either buy or sell 100 shares of stock at a specified, fixed price by a specified date in the future.
Since you can always buy or sell 100 shares of stock, you might ask, “Why do I need to purchase an Option to gain that right?”
Well, Options fix the price of 100 shares of stock. Often, prices are dynamic, rising and falling, but Options freeze the price. Therefore, you could buy an Option for much cheaper than buying 100 shares outright.
What is Options Trading?
There are two types of Options: Calls and Puts.
Call Options grant its owner the right to buy 100 shares of stock.
Put Options grant its owner the right to sell 100 shares of company’s stock in the future.
Options can be frightening because you’re putting money into an intangible asset that evaporates upon the passing of a deadline.
However, by acquiring the correct knowledge, an investor can use this time frame to secure profits unaccounted in other platforms within the industry; in fact, it’s the only platform that’ll allow you to create returns as high as 400% in a single day.
But, risk is high that you could lose your entire principle.
Options Trading: Terminology.
Besides Calls and Puts, you also have other important basic terminology.
[Strike Price:] the price that stock can be purchased at.
[Expiration Date:] the date an Option expires and becomes worthless.
[Option Premium:] the current price of an Option, which a buyer pays, and a seller receives at the time of transaction.
How Money is Made: Calls.
When you buy a Call, you’re given the right to purchase 100 shares of stock. And when you sell a Call, you’re selling this right to someone else, to purchase the Option.
[EXAMPLE:] You decide two months ago to buy a Call. You paid the price of $200, which entitled you to buy 100 shares of underlying stock at $55 per share. Therefore, the Striking Price is $55.
The option is due to expire later this month. Currently, the stock is selling at $60 per share, and the Options current market value is $600.
You have two choices:
- Buy 100 shares of agreed $55 per share, which is $5 per share below market value. Or…
- Sell the Call for $600, realizing a profit of $400.
How Money is Made: Puts.
As a Put buyer, you acquire the right to sell the stock. And as a Put seller, you grant this right to someone else.
[EXAMPLE:] You bought a Put last month and paid a premium of $50. Meanwhile, the stock’s market price has fallen to $7 below the exercised price in the Put contract specified in the Put contract, so the Put is now valued at $750.
You have three choices:
- Sell the Option and take the $700 profit.
- Hold onto the Put and hope it declines even further.
- Exercise the Option and sell the 100 shares of stock for $7 per share more than the current market value.
Benefits and Risks.
Options trading is advantageous because investors have more leverage on the Options platform; in other words, more options for controlling the outcome.
The choices prevalent across the trading platform allow investors to create profits pass mere speculation. Although, it’s a high-risk, high-reward proposition, there are ways to turn around profit that are not available when trading stock.
When proposed with the risk of trading Options, it can be frightening to know that your entire invested principle could experience loss.
However, this is due to lack of common knowledge.
And just as well-informed investors make markets healthier for everyone involved, poorly-informed investors make markets unhealthy, or even dangerous. Successful, educated investors understand both the potential for profit, as well as potential for loss.
Risk is very real. But, with the experienced hand of an educated, specialist, you can mitigate the risk.
The Next Step.
OCM offers an industry-exclusive Options Trading Program.
And since the goal of any investment is to make money, we’ve introduced this program to give investors the opportunity to invest into a platform with substantial gain potential, without taking on the risk associated with trading options.
By mitigating the risk with helping hand of Ted Friel-an options specialist who sold his private company to Goldman Sachs and is listed with Bloomberg Businessweek.
We’ve prepared a Free Options Trading Guide for you.
Inside, you’ll find many more examples like these:
[EXAMPLES:] You buy a Call for $200, giving you the right to buy 100 shares of a specific stock for $80 per share. If the stock value rises above $80, your Call will rise in value nearly dollar for dollar with the stock. Let’s say it rises $4. You’ll earn a profit for $400-if you sell. That would be the same profit from investing $8000 and buying 100 shares .
But, there’s more. Inside you’ll be given detailed examples to:
- How Calls and Puts can create substantial profits.
- Strategies that can be employed.
- Ways to mitigate risk.
- How OCM uses Fundamental and Technical Analysis to identify opportunities.