Options investment can be safe – if done right. Here's one way options pros make big money while slashing their risk. Don't worry that options investment is too complicated. A little coaching is all that’s needed. For now, focus on the benefits, not the how-to.
Make Money Whether Stock Prices Go Up or Down
Suppose a big price move is coming soon -
* Earnings announcement.
* FDA ruling on a drug proposal.
* Settlement of a patent infringement suit.
* Results of a major development project.
* Price break-out from a long-standing range.
* Anything else that raises price volatility.
Prices will make a big move soon, but which way? What to do?
Straddles
Buy an options straddle - a real safe money options investment. Here's what to do -
* Buy both a call and a put on the same stock.
* Use the same strike price and same expiration date for both the call and the put.
* Pick the strike price closest to the current stock price,
* So there's an equal chance of the call or the put going into the money.
Then make money if there's a big move up or a big move down. Lose money only if the price doesn't move much at all. So look for volatile stocks, industries, and markets.
Here's an example with a stock we'll call ZZZ -
* ZZZ trades at $50.10 a share. $50 is the nearest strike price.
* $50 ZZZ calls expiring in July, 2011, cost $1.94 a share. $50 ZZZ puts expiring in July, 2011, cost $1.73 a share.
* The options straddle would cost $3.67 a share - $1.94 for the call, plus $1.73 for the put.
* You make money if ZZZ goes at least $3.67 up or $3.67 down from $50.
* That's a 7.3% move in either direction - a small move over two months for a volatile stock.
Safety
The options investment is safer than just buying stock.
* The ZZZ straddle costs only $367 - your maximum possible loss.
* 100 shares of ZZZ stock instead of the straddle would have cost $5,010 - your maximum possible loss.
It's safer to risk $367 than $5,010. But what about profits?
If ZZZ rose to $60 a share -
* You would make about $600 on your straddle - a 163% percent profit!
* You would make about $1,000 on the stock - only a 20% profit.
If ZZZ fell to $40 a share -
* You would make about $600 on your straddle - a 163% profit!
* You would lose about $1,000 on the stock - a 20% loss.
The options investment - the straddle - and the stock both have about the same mathematical probability of reaching a profit or showing a loss.
The straddle risks less money for bigger percentage returns. It's the safer, smarter thing to do.
Finding Straddles
Finding good stocks for straddles means weighing -
* Market and business factors that might affect stock prices.
* The timing of those market and business factors.
* Volatility of potential stocks.
* The expiration date and cost of potential straddles.
Find out more about options investment at http://safemoneyproducts.com/options-investment. Subscribe now at http://safemoneyproducts.com/subscribe to get 4 Free Reports and bi-monthly Action Alerts.
Make Money Whether Stock Prices Go Up or Down
Suppose a big price move is coming soon -
* Earnings announcement.
* FDA ruling on a drug proposal.
* Settlement of a patent infringement suit.
* Results of a major development project.
* Price break-out from a long-standing range.
* Anything else that raises price volatility.
Prices will make a big move soon, but which way? What to do?
Straddles
Buy an options straddle - a real safe money options investment. Here's what to do -
* Buy both a call and a put on the same stock.
* Use the same strike price and same expiration date for both the call and the put.
* Pick the strike price closest to the current stock price,
* So there's an equal chance of the call or the put going into the money.
Then make money if there's a big move up or a big move down. Lose money only if the price doesn't move much at all. So look for volatile stocks, industries, and markets.
Here's an example with a stock we'll call ZZZ -
* ZZZ trades at $50.10 a share. $50 is the nearest strike price.
* $50 ZZZ calls expiring in July, 2011, cost $1.94 a share. $50 ZZZ puts expiring in July, 2011, cost $1.73 a share.
* The options straddle would cost $3.67 a share - $1.94 for the call, plus $1.73 for the put.
* You make money if ZZZ goes at least $3.67 up or $3.67 down from $50.
* That's a 7.3% move in either direction - a small move over two months for a volatile stock.
Safety
The options investment is safer than just buying stock.
* The ZZZ straddle costs only $367 - your maximum possible loss.
* 100 shares of ZZZ stock instead of the straddle would have cost $5,010 - your maximum possible loss.
It's safer to risk $367 than $5,010. But what about profits?
If ZZZ rose to $60 a share -
* You would make about $600 on your straddle - a 163% percent profit!
* You would make about $1,000 on the stock - only a 20% profit.
If ZZZ fell to $40 a share -
* You would make about $600 on your straddle - a 163% profit!
* You would lose about $1,000 on the stock - a 20% loss.
The options investment - the straddle - and the stock both have about the same mathematical probability of reaching a profit or showing a loss.
The straddle risks less money for bigger percentage returns. It's the safer, smarter thing to do.
Finding Straddles
Finding good stocks for straddles means weighing -
* Market and business factors that might affect stock prices.
* The timing of those market and business factors.
* Volatility of potential stocks.
* The expiration date and cost of potential straddles.
Find out more about options investment at http://safemoneyproducts.com/options-investment. Subscribe now at http://safemoneyproducts.com/subscribe to get 4 Free Reports and bi-monthly Action Alerts.
