Five keys to successful stock options

Stock option trading offers the skilled trader more potential for making a fortune option trading than almost any other form of online trading in today's market. The degree of controlled risk along with superior leverage allows a knowledgeable option trader the chance to make huge profits but an aspiring option trader must have a solid foundation of education about what makes up a sound option trading method in order to have a long term success at option trading. There are five essential keys that any option trader must understand when developing a winning stock option system.

First, you must understand the degree which time affects the premium of the option you are considering trading. There are two parts you must consider when factoring time into the stock option trading decisions. The first thing that you must take into account is the intrinsic time left on an option. Since options have a limited time period of anywhere from 30 days to several year depending on the particular option that you bought you must be sure that you purchase the correct option containing enough time on it to insure that time decay doesn't erode your investment away before your position has enough time to be profitable.

The second skill of trading options profitably is factoring time into your trading system in relation to trading a particular stock option and knowing the statistics of your option trading methodology or option trading setup by knowing the average holding period of a trade signal. If your average holding time for an option trade is seven days then you don't want to buy an option with three months of time premium left on it because you would be paying more for the extra time with the option's purchase price. Nor would you buy an option with less that 30 days till expiration as time decay would erode the value of option so quickly that even if the option's underlying stock movement moved favorably to you the time decay would prevent you from realizing a gain in the option itself.

The third step to successful stock option trading is comprehending the relationship of volatility between the market, the underlying instrument that the option is based on, and the effect is has on the cost of the option itself. When the stock market as a whole as an index goes thru periods of low volatility or experiences low trading volume then the stocks that make up the market tend to follow general market and also begin to follow suit with periods of low volatility which cause cause the value of stock options to become cheap. However if the general market's volatility begins to spike it causes individual stock option premiums to increase in value as long as the market moves in the trader's favor.

The next key in how to trade stock options successfully is having a stock option trading method that takes these key factors into consideration while giving clear entry signals, clear exit signals, a defined system of trade management, and a profit factor greater than your average loss over a series of trades. Knowing the ins and outs of various trade setups is useless if you don't have a trading methodology that guides you in every step of the trade process. A solid trading method holds you by the hand and defines each step while leading you to being a consistent winner in the markets and a profitable trader when all is said and done.

The final key to trading stock options successfully is your trading discipline. An individual trader's discipline are vital to trading stock options successfully. It is critical that a trader approach stock option trading while factoring in their own level of trading discipline into their overall approach to trading the markets. You can give two traders the same exact profitable trading system but it's very likely that they will experience very different results. The reason for this is usually is because the one that has the ability to remain as detached from his losing trades as well as his winning trades while maintaining the discipline to follow the system's rules no matter what occurs on any one individual trade will emerge the net winner. A trader's discipline is so essential that even if a trader has the greatest stock option trading system ever devised but has no discipline he will likely turn into a losing trader so keep this in mind when devising your approach to trading stock options.

Using these five steps as a foundation to create your own stock option trading system can help you avoid the mistakes of many other stock and option traders. By understanding time decay, factoring an option's time into your trading method, how volatility impacts a stock option's intrinsic value, what details a winning stock option trading system, and your own trading psychology you now have a the key steps to build your trading career on.

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Trading Stocks Online

It has also allowed many people that may not of otherwise had the chance, the opportunity to utilize their existing home computer to enjoy the thrill and excitiement of trading stocks online by being able to use their own home computer.

Several different types of stock trading exist including day trading, swing trading, market making, scalping (trading), momentum trading, trading the news, and arbitrage.

Although there are countless companies offering courses in picking stocks, and many do actually build success through Technical Analysis or Fundamental Analysis, many economists state that it's very unlikely that any amount of analysis can help an investor make gains above the stock market it self.

This gives weight to the "Buy and Hold" strategy of simply buying stocks, and holding on to them in the hope that they will eventually rise in price over time.

However, during the bear market of 2001-2003, the buy-and-hold strategy lost some followers as some of the large market indexes like the NASDAQ saw their values decline by over 60%.

Many traders say that simply trading in the direction of the trend is the most effective means to be profitable in the stock market over the long run.

A stock trader or stock investor is an individual or company who buy and sell stocks in the financial markets.

A person can be a stock trader or investor while still maintaining other professions. This is a very attractive feature which attracts many players into the markets.

Stock investors, as opposed to stock market traders, purchase stocks with the intention of holding for an extended period of time, usually several months to maybe a few years.

Stock traders usually try to profit from short-term price volatility with trades lasting anywhere from several seconds to several weeks.

Pure technical analysts study charts of stocks, and believe that the stock prices already reflect all price and market influences before investors are aware of them, hence rather than spending time looking at fundamental analysis or studying company information, they study just the price action alone.

Most traders before they begin trading with real money, first do a series of Paper trading examples. With paper trading, they can get a bit of a feel for how their trading is going to perform, before they risk any real money.

Trading without first having some sort of trading plan in place can have a considerably high level of risk, uncertainty and complexity, especially for unwise and inexperienced stock traders/investors seeking for an easy way to make money quickly.

How To Trade Stocks Online
With the change in technology, as well as the added time constraints placed upon us today, no one has time to visit the stock brokers office like they may once had.

Over the last few years, the Internet has proved to be an invaluable tool for stock market traders. This, plus the fact that stock trading can now be done in the comfort and privacy of your own home or office, has made trading stocks online a very acceptable method of investing.

There are a few pointers if you want to get started ...

* You should always do your background due diligence checking before investing in any company, or buying shares. You can even call the company and have them send you out a copy of their latest prospectus. This gives you a clear picture of who the company directors are, what line of work the company is involved in, and what projects it has undertaken. It will tell you how much money the company has in the bank, how much debt they owe, and how much money is outstanding to them from debtors.

* Based on their financial picture, along with their profit and loss statements, balance sheets, and projected earnings, you can make a fairly clear decision about the viability of this company before you invest your money.

* If you decide that trading stocks online is the best method for you, then you should chose a stock broker who has a secure website, and who has a reputation of being trustworthy and reliable.

* Make sure that you know the fees per trade that your broker is going to be charging you. Knowing this information beforehand can save a lot of pain later down the track. If you are unsure, then just ask.

* If you are going to be doing your trading online, then you may need assistance. You need to know what level of support you can expect to get. Can you call anytime, and is there an additional cost in using their support facility?

These are just a few points for you to consider before getting started as a stock market trader obviously there are many more.

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Options Trading Mentor

To the average person, the stock market itself denotes something quite mind-bogglingly complex. Of course, options trading simply makes the merely complex truly confounding to such individuals. Providentially, the modern world is all about making complex things simple and this process has been aided effectively by the internet. Options trading is no longer as remote and inaccessible as before, patronized only by the most hardened of stock market junkies – if you’re interested enough to learn about it!

First off, why do people trade options? The answer is that options trading provides the investor with leverage and also flexibility. Let’s compare trading stock to trading options. When we buy a stock, it must go up for us to realize a return on our investment. If we sell a stock short, the stock price must fall for us to realize a profit. However, with the use of options, an investor can realize a return if the underlying asset does not even move. An option trader can construct a trade that will actually yield a profit no matter what direction the underlying asset moves. Some option trades may require the underlying to stay within a range, and others may require a large move, but the point is, with options we no longer have to be correct about the market direction. Another aspect about options is that an option trade can easily be adjusted. So if we are ultimately wrong about the range we thought the underlying would trade in, well we can adjust the position. Options are very flexible vehicles to invest with.

What’s important to remember though, is that options trading is not to be dabbled in lightly. Options trading requires time, research and dedication, resulting in options trading being an investment tool used only by people for whom investment is a profession and/or people who want to manage their wealth directly, without the need for middlemen. This is because options trading, although a very flexible investment vehicle, is a very complex. Remember, when we trade stocks, we are only trading direction…up or down. However, with options, we are trading 3 dimensions…..time, price and volatility. The average investor never learns all the complexities of option trading. Many make the assumption that the art of trading options can be learned by reading a few investment books, but the best way to really learn this craft is to study with an experienced options trader/options mentor.

If you’re interested in the world of options trading, and looking to invest, it is very advisable to take up classes. There are a number of very comprehensive websites offering up-to-date and detailed information on how best to maximize your gains from options trading. These courses give you the chance to learn absolutely everything you can about the market, how it works and most importantly, how best you can use its trends to your own financial advantage. Real-time trading and in-depth technical analyses are often features of these classes, thus giving you the opportunity to view options trading as it happens.

Personal mentoring is quite indispensable for options trading, and this type of education can give you the chance to learn how to manage this complicated, yet rewarding, investment vehicle we all know as options. But as much as the internet is a boon, it can also be quite deceptive – so choose your options course wisely. A course that offers you one-on-one mentoring, live examples of trading and in-depth theoretical knowledge is usually a good bet. Also, any prospective students should look for a course taught by active option traders who will educate you on option Greeks. Learning the Greeks is an essential part of becoming a successful options trader. Options trading courses can be expensive, but they’re worth the investment considering the amount of time and money that you will ultimately be investing in the options trading world!

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Make Money Online

You've heard all the myths about regular people like you and me pulling down six-figure incomes from the Internet. These people have no special business or marketing training, didn't embark on off alongside a large amount of cap, and don't spend 20 hours per day working on their enterprises. In reality, it seems that they're able to make money online unaffected by expending very much effort at all. Understandably, you desire in on the action. What's their secret? Well, there are actually lots of different ways to consistently -- and legally -- produce money online. For example, if you have a product to trade, it would be very simple to get set up at a few distinct auction sites. Thousands of people make a full-time living just from operating auctions. Even if you don't keep a product to sell, you can still make cash online.

Numerous people get their start from putting up a basic website and padding it with affiliate links that produce a commission every period a visitor clicks on the links. Of course, you would have to have some kind of relevant information on the website or it's not likely that visitors will keep coming back to it. If you're a bit more daring, you can try to make money online from various investment programs. You can either hook up with a program that is already in place, or strike out on your own. Some of the existing programs out there consist of private investor's clubs and HYIPs. A private investor's club is a group of people who pool their capital together in sequence to invest it in various financial markets. Usually, one or more of the members is a certified dealer or seasoned analysts, so the investments are both savvy and mid- to low-risk. The biggest drawbacks to a private investor's club is that you have to be invited by a present colleague in order to join and you usually have to provide a significant investment up front. HYIPs are additional vehicle that regular people have used in order to make cash online. A HYIP is a lofty-yield business program, and is based on some of the same principles as secret investor's clubs. With HYIPs, however, membership money are used to invest in very risky prospects that can either go bust or pay off handsomely. Most HYIPs are open to any and all comers, so you don't need to know anyone in order to join. In order to create money online from your own resource know-how, you can sign up with an e-trading firm and trade stocks, bonds, and futures all day long with only a few clicks of your mouse. These are just a few of the innumerable ways to make cash online. You can decide to pursue one of the avenues mentioned above, or invent your own original idea into a gold mine. Either way, you're sure to be able to detect a niche that will allow you to generate a steady fundamental or minor income stream.

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Sales & Trading and Investment Banking

There are several ways to compare and contrast the differences between investment banking and sales and trading. The first is the actual work that they do and the time in which this work is done. Investment bankers primarily help to raise money for clients through stock or bond offerings or advise clients on mergers or acquisitions. The endless flow of pitchbooks (PowerPoint presentations to clients), the detailed financial modeling and around-the-clock client schmoozing are all focused on achieving one result: a deal that will generate substantial fee income for the investment bank. This fee is calculated as a percentage of the deal (for example, a percentage of the money raised by an initial public offering). Investment bankers work for months -- even years -- to generate one deal, schmoozing comany execs until the company is ready to raise money or acquire a company. But when the company is ready and hires the bank to ehlp them, the reward for the bank is substantial.

Salespeople and traders also work on deals -- every trade is a deal -- and also entertain clients. Compared to investment banking, however, it takes much less time to consummate a transaction in S&T. Typical trades are consummated in seconds or minutes, and the average fee per trade is measured in cents per share traded rather than as a percentage of the deal's proceeds.

Another big difference between S&T and I-banking is the lifestyle. Sales and trading professionals are the first-in-and-first-out in the investment bank. To get a jumpstart on the trading day, salespeople and traders normally take the earliest train into work. But they are the first ones out of the office, leaving shortly after the markets close. Salespeople and traders also never work weekends -- trading desks are completely abandoned on the weekends. In contrast, investment bankers are expected to be their desks during the weekdays and weekends, at all hours and throughout major holidays. If you ever want to see a sad sight, go to one of the major investment banks on Christmas Day or Easter. Around lunch time, you'll see investment banking analysts trickle down from their cramped bullpens to pick up their food orders from the delivery guy. Sales and trading is a sprint; investment banking is an endless marathon that rarely ever stops for anything.

Why do investment banks have sales and trading departments?

The most important function of a sales and trading department at an investment bank is, of course, to make money. An investment bank collects significant fees every time its sales and trading professionals execute a deal for clients. Traders and salespeople add incrementally to the bottom line through daily profit and loss and commissions, and raise the profile of the firm in the marketplace.

But there are ancillary benefits to having a strong S&T department. Investment banks provide capital raising and mergers and acquisition advisory services. Salespeople and traders are needed to create and maintain an active secondary market in these new issues. (Investments that are simply bought and held, such as life insurance, do not have secondary markets. Secondary markets exist to allow investors to buy and sell investments such as stock even after an initial public offering.) Most large investment banks target their secondary market activities towards issues that will support the primary market activities and capital raising efforts of the investment bank (for example, a client company's IPO). Companies and other entities that raise money by issuing stock or bonds are primarily concerned with how much money they can raise and at what price, but they're also concerned with the ability of the investment bank to properly distribute shares of the new issue and the ability of the investment bank and its syndicate (other investment banks partnering in the deal) to actively trade the new issue. An investment bank's market share of the daily trading volume in the issuer's stock can often be a decisive factor in deciding which bank gets to bring the new issue to market. Of course, to do this properly, traders will also trade stocks that are important in the context of the overall marketplace.

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