Trading options is a risky business.
You have to learn the basics, take note of stock movements and rely on your instincts.
While these ideas may prevent you from buying stock options in the market, it is still best to gauge whether you can survive or have the guts for this type of trading.
Options income strategies for monthly cash flow abound in the net these days.
Not only are you facing a number of online tutorials or methods, you are also challenged by media speculations and tips from pundits.
Business enthusiasts such as the media and brokerage firms, tend to downplay the idea of investing if not trading options as a way of generating money.
On the other hand, a rise in the number of market players in the past years, seem to negate the negatives as well.
In fact, the year volume of contracts, as well as the number of investors, as shown in yearly statistics proves critics wrongs.
Meaning, many traders and investors still gamble on options income strategies for monthly cash flow True enough, options trading (specifically, buying 'call options') offer prospects with huge benefits and rewards.
Imagine possible increments of 100, 200 even 500 percent to possible monthly income.
However, trading options may result to losses and failures at hand.
Meaning, there is also a big possibility of losing your entire savings in an instant.
So, how can we avoid this trap? By understanding the following strategies and principles: Timing is everything.
Remember that stock options are wasting assets and are short-term investments.
You have to decide when to make the purchase, what type of stock and when to invest.
Time and options are basically foes, in the sense that you have to rely on market and price movements within a shorter period.
You may remedy this problem by means of acquiring LEAPS (Long-term Equity Anticipation Securities).
However, you have to pay for higher premiums.
Think hard before buying 'out-of-the-money' call options.
Safeguard your investments by being wary of underlying stocks movements.
This options income strategy for monthly cash flow may prove to be tricky, since you have to anticipate price increases.
Also, underlying stocks need to increase its value significantly, that is in order to generate more money.
The downside of this- predicting price increases is terribly hard so to speak.
Go for commodity stocks.
While buying call options spell disaster for others, commodity stocks could give you the best advantage.
You may initially want to buy call options in stable companies, but these types of stocks also have lower chances of price increases.
It pays to be 'liquid.
' Liquidity is synonymous with cash.
You have to limit your stock options by choosing liquid investments.
Remember that trading options speaks of trends and movements and buying a call or put option that is low in volume, is not recommended as one of the options income strategies for monthly cash flow.
Gamble with your head.
Indeed, options trading are a gamble in itself.
You can never let your emotions rule over your head.
It is wise to invest a suitable amount of money but be careful in investing your lifetime savings.
As most money experts put it- live within your means.