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You probably realize by now that our trading preference is stock options.

Financial In Market But you have probably also been told or read that options are risky. Even worse, that you can lose your shirt trading them!

You can trade stocks, forex and futures. Depending on your account size "stocks" might not be an option for you, since you need at least $25, 000 in your account to daytrade stocks. Forex trading is very popular, but if you are new to... Privacy Policy Contact Us Links Rockwell Trading Articles Disclosure Statement for Futures and Options

Oriental Trading Well, what is the truth?

Today is also expected to be devoid of data so we should see the EUR continue range trading on it's heights and will heavily depend on the volatility of the equity markets. JPY Yesterday, the Japanese currency dropped against all 16 major currencies after the Fed rate cut fueled a rally in U.S. stocks, spurring investors to buy riskier assets funded by borrowed yen. The dollar pared some of its early gains against the yen to trade at 115.90 yens per one USD.

Financial Forex Forex Software Let's take a look at stock ownership. What can happen if you buy stock?

- How To Invest In Options Introduction An option is a derivative security. Its value is determined by the underlying issue, which for our purposes, we£l assume is either common stock or an index (a widely followed basket of stocks). traded Options

Trading The price can go up.

Have you ever wondered why you can't simply move an application from, say, Because moving applications is risky and it doesn't always work.

Trading Financial System The price can go down.

Most people think of day trading as being more risky than swing trading. For those day traders that exit their positions at the end of the day, their risk is greatly reduced because they are not exposed to any losses due to overnight events. Also, potential losses due to events that occur during the trading day can usually be minimized with the use of stop loss orders. TradingSolutions enables you to simulate stop loss trades when backtesting your models.

Day Trading The price can go sideways.

Forex Financial Trading The In the first case, you can make money. In the second you lose money.

Fortune Make Option Trading And in the third case you don't directly win or lose but in fact it costs you money in two ways. The direct cost of brokerage and fees. And the indirect cost known as opportunity cost.

Science Of Financial Market This is the cost due to lost opportunities. The fact that you aren't able to be involved in other, potentially profitable trades.

Future Trading So if you purchase stock you can only make money if the stock price goes up.

Financial Sales Services Now some of you may be thinking, "But what about shorting?"

Commodity Trading Well yes, short selling stock is possible but it is quite a tricky strategy and has almost unlimited risk so it is certainly not an approach we recommend.

Financial Services Trading You see, when you short a stock, you actually sell a stock that you don't own. And your intention is to then buy the stock back at a lower price. The price difference is your profit per share.

Online Forex Trading But can you see what the problem is here?

Financial Portfolio Trade Well what happens if the stock price goes up? Particularly if it goes up a lot?

Sierra Trading Post As you have sold the stock at a lower price you now have to buy it back at a higher price. And so your loss can be substantial.

Trading Financial Future So, to summarize, when you trade stock you can really only make money if the price increases.

Forex Trading Software Now there is one other aspect to this that I want to address. And this is that owning stock is expensive!

Trading Post If you purchase 100 shares of a $50 stock it will cost you $5000. And if you buy it on margin it is still $2500.

Trading System That is a lot of money to outlay. And, more importantly it is a lot of money to put at risk. Especially seeing that you only have a one in three chance of the stock moving in the right direction.

Forex Trading System Plus as stocks don't trend all that often you not only need to pick the right direction, you also need to be able to pick the right time.

Fx Trading So stock trading is not that easy. And it's expensive.

Trading Card But options provide a great alternative.

In Online Trading For a start you only have to invest about 2% of what the stock was worth and yet you still control the same 100 shares.

Online Commodity Trading So in the example above, instead of investing $5000, we might only have to outlay $100.

Line Trading Plus, if you select the right strategy, you can profit no matter whether the stock price goes up; goes down or even goes sideways!

Forex Currency Trading And finally, your risk is limited. The maximum you can lose is the amount you put into the trade. So in the example above - $100.

Online Option Trading But the best thing of all is the leverage that options provide.

Online Currency Trading In the above example, if the stock price goes up by $5, the profit on the stock trade would be 10% or on margin, 20%.

Foreign Exchange Trading But with this increase in stock price the value of the option might increase by 100%. And so the profit on the trade would be 100% - or ten times that of the straight stock trade.

Trading Software So don't just accept the common view that owning stock is safe and trading options is dangerous.
If you understand options and learn how to trade them they can be a great investment vehicle.

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About The Author:

Oriental Trading Company For your Free Stock Market Trading Mini Course "What the Wall Street Hot Shots won't tell you!" go to: http://www.stockmarketgenie.com

Day Trading Online David Chandler

www.StockMarketGenie.com



For your FREE Stock Market Trading Mini Course:

Forex Currency Trading System "What The Wall Street Hot Shots Won't Tell You!" go to: www.StockMarketGenie.com

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