Build Wealth On line using Put Option Trading

By Dale Poyser


The stock market happens be one of the very popularly accepted strategies for you to create money.

Inside the stock industry a very very good means to generate cash and it is options trading. Simply put I earn 15 t0 20% each and every month by trading options, more precisely put options.

There are actually two different parts to put options investment.

At this time there is usually the facet associated with coverage for ones portfolio also called purchasing insurance for your stock, and then there is the wealth building, monthly cash flow side aka getting paid to own a stock. Let's take a quick glance at both of these.

Buying Insurance with Put Options

To be the buyer of this put options contract, you will have the "option" to offer a stock set at a certain price until you sell the actual option or perhaps the particular option expires.

Nearly all investors implement puts to protect their account from big movements to the downside and furthermore lock in profits.

For instance, lets say a trader obtained a stock and it increased in price by about $10 per share. This is definitely a really large advance.

At this point the question you will be wondering is...should you take profits or let it ride? Additionally you really need to consider that should you do nothing, your gains could possibly be wiped out in minutes with a bit of bad news. Taking zero action is among the most detrimental actions to 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 hand of the put options coin is the way you are able to create wealth with options by making residual income each and every month.

In order for the stock buyer to secure his stocks by purchasing protective puts, he will need to have someone willing to sell those put options to him.

I make cash every month by simply selling put options against stocks I will be ready to own and often 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.




About the Author: