Build Wealth On line using Put Option Trading

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

Being the purchaser of this put options contract, you’ve got the “option” to be able to offer the stock set at a certain price until you sell the option or perhaps the particular option expires.

Nearly all investors take advantage of puts to protect their trading account from big movements to the downside and also lock in profits.

For example, let’s imagine an investor purchased a stock and it went up in price by about $10 per share. This is definitely a fairly large move.

Right now the question you may be wondering is…should you take profits or maybe let it ride? Additionally you have to consider that should you choose nothing, your profits could possibly be destroyed in minutes with some not so great news. Taking no action is probably the most detrimental action you can take in 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 personally make money month after month by selling put options against stocks I’d personally be prepared to own and sometimes even against stocks that I never plan to own.

The important thing if you want to be building wealth with put option selling will be to sell puts on securities you will not mind owning and also look for stocks that are relatively flat as far as their price goes. Flat stocks are stocks that will move at most $3 in a four week period and possess very 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 creating and building 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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