Thursday, December 27, 2007
An investor often employs the bear put spread in moderately bearish market market conditions, and wants to capitalize on a minimul decrease in price of the underlying stock. If the investor's opinion is very bearish it will generally prove more profitable to make a simple put purchase.
An investor will also turn to this spread when there is uneaseiness with either the cost of purchasing and keeping the long put alone, or with the confidence of his bearish market opinion.
The bear put spread can be thought of as doubly hedged strategy. The cost for the put with the higher strike price is partially offset by the money received from writing the put with a lower strike price. Therfore, the investor's investment in the long put and the risk of losing the entire premium paid for it, is reduced or hedged.
Wednesday, November 7, 2007
A Put is the opposite of a call. It is the right to sell a stock. Aside from straddles, this is the way I got started trading. I bought puts onoverextended stocks. In my experience, stocks tend to fall much faster than they rise. This is great for the use of puts. One of the problems with buying and holding of stocks is that you can only makemoney if a stock goes up. Puts allow you to profit whena stock goes down as well. In the above example of GRMN, a november 100 put cost about $4 on tuesday. If the stock moves below $96 anytime time in the next 2 weeks, you will have a profit.
I mentioned that I got started with straddles. A straddle is simply buying a put and and call at the same time. It is a very simple way to take advantage of a stock you think is ready to move!
Take and add GRMN to your watch list for the next 2 weeks. I feel confident it will move more than $8 dollars from $100. It may even move on both sides of 100, making both the put and call possibly in the green. Another stock I am keeping an eye on is GSF. I put a straddle with a cost of $3.10 at the strike price of $85 yesterday.
One subject that Investools teaches is knowing when to sell. I believe this is very important and often overlooked. Everybody talks about when to get into a trade. Knowing when to get out will make you a very sucessful trader. That is something which I will stress throughout this blog!
Have a great day!
Wednesday, October 31, 2007
Options are very versatile. They allow you to adapt to up, down or flat market conditions with ease. Options can be as conservative or risky as you want. Since options can be risky if you want them to be they come with the following standard disclaimer:
"Options involve risk and are not suitable for everyone. Invest only with risk capital."
In upcoming posts I will go into the basics of Options using examples. Topics covered will include:
- Calls and Puts
- In the money vs. Out of the money
- Options premium
- Greeks (gamma, beta etc.)
Have a great day!
Saturday, October 27, 2007
- Associated course - $5,000
- Masters Course - $11,000
- PHD Course - $23,000
From my conversations with trader, while Investools is overly diligent in selling you additional materials, they so offer some good advise along the way. Thruth be told, all the info they teach you can be found for free on the internet. It is my hope to teach you some of these things in this blog.
On way around the Investools scam is to make sure that you keep all the materials that they give you on the first day. You can turn the materials in at the end of the first day. Make sure you tell them you will not be returning for the second day. This way you will not be charged for the course. Investools will try for the hard sell on there other programs and other seminars.