Buying Call Options | Profiting When a Stock Goes Up in Value

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Buy Call options when stock prices are rising and you'll easily make 50-100% return on your money.

This is the strategy I have used most often and the one that has made me the most money.

It also requires significantly less money than buying stocks outright.

The lucrative aspect of Calls, or any stock option for that matter, is that a stock may rise upward in price by 1% and the same price movement will cause the option to rise in price by 10%.

You get more "bang for your buck".

This is one of the major reasons people trade stock options.

If you recall from the earlier lessons, a Call option gives its buyer the right, but not the obligation, to buy shares of a stock at a specified price on or before a given date.

Calls increase in value when the underlying stock it's attached to goes up in price, and decrease in value when the stock goes down in price.

A typical use for this type of stock option is to profit from an increase in the price of the underlying stock or to lock in a good purchase price if you think the stock is going to rise significantly.

**You will most likely never exercise your rights to buy the stock. You just want to benefit from the movement of the stock without having to own it.**

Since there is no limit to how high a stock can rise the maximum profit you can make with a call option is unlimited. As the stock continues to rise so will the value of your option.

The max you can lose with a call is the price you paid for it. So if it cost you $200 to buy the call that is as much as you can lose. A lot less money than what some people lose when they buy the stock outright.

Buying 100 shares of any stock will cost significantly more than buying a stock option yet you can often make the same amount of money. You'll see an example of this in the next lesson.

Allows you to participate in the upward movement of the stock without having to own the stockYou only have to risk a relatively small sum of moneyThe maximum amount you can lose on a trade is the cost of the CallLeverage (using a small amount of money to make a large sum of money)Higher potential investment returns
The option has an expiration date so time works against youThe stock has to make a move upward in order for the Call to increase in valueIf the stock stays flat or doesn't move, then the option will lose value due to time decayReturn to the top of this page, "Buying Call Options"

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Trade Stock Options - Option Trading Example on How to Profit with Stock Options

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Why should you learn how to trade stock options?

The options trading example in the video below will answer that for you and also help you to see why options trading is the best chance you have to create wealth...

You'll learn a priceless stock tip that will help you avoid failing as an options trader...And you'll see an example of making a 443% return on your money with IBM the stock...

And when you watch the video please keep in mind that these are the "real" and actual returns you would have made...

Before we move into our example, I am making the assumption that you have already read lessons 1 and 2 of this module (the table of contents is at the bottom of this page).

***

Let's pretend for a moment that you do research and feel that IBM stock will go up in price in a few months, but you don't want to put all your hard earned money at risk yet.

Buying 100 shares would cost you $9,000 (100 shares * $90).

You want to test the waters to see if your theory will pan out. In order to do this you "buy" an options contract that gives you the "right to buy 100 shares of IBM stock for $90".

This contract costs you $680 and compared to $9,000, $680 isn't a lot of money to risk.

You paid $680 for the right to buy IBM at $90. Six months later, IBM is trading at $130 dollars. So essentially you could exercise your contract, buy IBM for $90 and then immediately sell it for $130.

Of course, like in the land example in lesson 1, you could sell your contract to someone else for let's say $1,080. In doing so, you would make a profit of $400 or 59% return on your money.

***Here's the lesson: Trading stock options is where you invest a relatively small sum of money to buy a "contract" that controls something larger.

Your research tells you that your contract will increase in value before a certain date. When it does increase in value, you're going to sell the contract for a higher price than you paid for it and pocket the difference.

Don't worry if you don't fully understand this example. It doesn't stop here. I'll continue to explain option trading as the tutorial progresses along.

As a matter of fact, this entire site and web based home study course was designed to explain options trading in great detail.

There is no way I can fit everything onto this page or on this site for that matter. This is part of the reason why I started the Options Coaching Program.

In the program, I can just "show you" what I do and lead you through a simple 4-step process I created to trade stock options.

Seeing how to trade in real time really helps with the learning process.

To learn more go to the Learn How to Trade Stock Options page.

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Understanding Stock Options - The Key to Options Trading Wealth

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The key to understanding stock options and how they can play a huge role in you making money is to realize that you don't need thousands of dollars to get started.

Yes, having thousands of dollars will help you reach your goals faster, but stock option investing allows you to invest small sums of money and quickly build up your account.

Watch the video below and I want you to imagine what your life would be like if you were able to consistently make 267% return on your money...

Stock option investing allows you to take a small sum of money and have the chance to earn a high return on that money. This will allow you to build up your investment account quicker.

Not many people have $30,000 laying around that they can invest in stocks, but most can find $90.

Let's pretend the stock price for Apple Inc. just closed at $99.72. So if you wanted to buy one share of Apple computer it would cost you $99.72, plus commissions.

Let's say that one year later the stock has gone up in value by 10%. You would have made roughly $10 on your $99 investment.

Now earning 10% return on your money is great, but I wouldn't advise anyone to wait a whole year just to earn $10!

Everyone knows the more money you invest in stocks the more money you can make. Now let's see how the same $90 can be used with stock option investing...

I'll show you a $90 option trade that I made. Looking at each of the blue arrows lets go over this trade. The symbol is "HUM" which is the stock symbol for Humana Inc.

Using my trading tools I saw that a potential trade was on the horizon.

The stock looked like it was about to take off in price. I bought "2" contracts of a Feb 2009 45 Call option for $.45. You will learn more about call options in a later lesson, but essentially you buy call options when you think the stock is going to rise.

Now that you know the definition of a stock option, what "rights" did I purchase with this "Call option"?

Yes, it means I bought the "right", but not the "obligation", to "buy" (Call option) 200 shares (2 contracts) of Humana Inc. on or before February of 2009.

**If you are confused and are still having a hard time understanding stock options then go back to the what are stock options lesson and review it again.

I paid $90 for these contracts. If you recall 1 option contract = 100 shares of stock. So you always multiply the options quoted price by 100 ($.45*100 shares=$45).

I bought 2 contracts ($45 * 2= $90). If this confuses you don't worry, we will get into how options are priced in another lesson. Just know I paid $90 for these 2 contracts.

Let's see how this trade turned out:

I closed the trade roughly 15 days after I entered it. The options went up in value to $1.65, or $165. I bought two contracts so that means $330 ($165 *2) was put back into my account.

Remember though I only invested $90 on this trade so let's see how much money I made.

$330 - $90 = $240 profit or 267% return on my money. Not bad for 15 days and only spending $90.

So this goes to show that you don't need a great deal of money to make a decent return on your money. Now I can't retire on $240 but 267% return on your investment is still 267%.

I hope this goes to show why stock option investing is so appealing. Stock options are one of the best investment vehicles I have ever learned about!

**Disclaimer: this is a very high risk trade; hence the reason I only invested $90. These returns don't happen often, but they do happen nonetheless. The purpose of the example was to show you that you don't really need a large sum of money to make decent investment returns.

I hope by now you are more interested in learning all you can about stock option investing. It's not for everyone, but I do feel that everyone should at least learn about them.

Understanding stock options takes time, but you can speed up the process by having someone show you how to trade instead of reading how to trade stock options from a book or online.

Obtaining an options trading mentor was one the best decisions of my life.

I tried the whole self education route, but I stayed broke and frustrated and couldn't quite piece together all the material I was learning for free.

If you value your time and would like to join other successful students in making trades like the one above then be sure to check out our Options Coaching Program.

You can also read one of our options mentoring success stories to see how understanding stock options can pay off for you.

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How I Doubled My 401K Account

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by Trader Travis
(http://www.learn-stock-options-trading.com/)

The experts will have you believe that all you have to do is buy and hold and dollar cost average and you'll reach your income goals.

Here's the truth as I see it: They don't want you to learn how to invest successfully on your own. They want you to believe you'll lose your money if you invest without their help.

They're hoping your fear of loss will compel you to keep giving them your money. This is in spite of the fact that studies prove that experts aren't that effective at reaping a high return on your investment.

According to a report published by Standard and Poor, only about 15 – 20% of mutual fund managers beat the stock market average in any given year!

I hope the Bear Market of 2008-2009 made people realize that the buy and hold formula has flaws. There were people who lost 10 years worth of gain during that Bear Market.

Once I became an options trader, I stopped listening to most so called experts because I realized they weren't looking out for my best interest. I started listening to people who had money (preferably millionaires) and it was amazing what I learned.

Most of what I learned was almost opposite of what the experts on TV were advising.

My job is to not just show you how to be an options trader, but how to be a better investor overall.

Options trading may not be for you and if it isn't, I at least want you to be able to create wealth through other means.

What you are about to watch in the video are 2 strategies I now follow called "buy and manage" and "power contributions."

"Buy and Manage" is the opposite of "Buy and Hold"
"Power Contributions"...well you'll just have to watch the video to find out.

**Update**
This video is now available as a bonus to all those who register for the Option Profit Formula Mentorship and Coaching Program

Regards,
Trader Travis

You may also like: Creating Wealth vs Return on Investment

Online Stock Option Trading - How to Trade Stock Options Like the Wealthy

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Learn online stock option trading and you will discover the secret tool of the wealthy.

By strategically using puts and calls you will discover how to trade stock options for easy, effortless and guaranteed monthly income.

And yes, I know that sounds too good to be true. When I first learned about options trading I was completely skeptical. But hold your judgment for a second until you watch the video below.

In the video below...

You'll see how one of our students increased his account by 30% while the stock market fell in price...And you'll see how another student has increased his account by 14% (in 2 months)...

This lesson will reveal hidden opportunities to make money in the stock market and when you finish you'll see with your own eyes what's possible for YOU after you learn how to trade stock options.

To stay up to date on all of our training join our option trading newsletter.

The belief that online stock option trading is too good to be true has, for years, been keeping millions of investors from realizing the full potential of their investment portfolios.

I used to also think the same thing, but luckily I took a step of faith and signed up for an options trading basics course and within a few months I managed to trade a $10,000 account all the way up to $70,000.

And then I got greedy and proceeded to lose money, but by that time I was hooked. I managed to keep some of my money and I spent the next 9 years perfecting what I had learned.

And you saw just 2 of those strategies in the options trading video above.

There are literally hundreds of different option trading strategies, but despite this fact there are only 2 types of stock options: puts and calls.

We cover the basic definition of puts and calls in the options trading basics course, but just know that puts and calls allow you to make money both when stocks are going up and also when they are going down.

For instance, we teach a strategy called "Set it and Forget it". It involves selling put options and it takes roughly 10 minutes to place the trade and because of the way we trade it, it requires zero management.

With this strategy we make money if the stock goes up in price and also if the stock goes absolutely no where.

And it the stock happens to go down in price then we will be obligated to buy a certain number of stock shares.

If this happens we don't care because we will then sell covered calls on the stock. Covered calls are like renting out a house you own. Covered calls are the oldest and most widely used of all option trading strategies.

Online stock options trading allows you to profit with the natural up and down flow of the stock market.

It's also why you don't need to fear another stock market crash as you'll make money regardless of which way the market trends.

If you'd like to learn how to trade stock options so you can earn an easy, effortless, and guaranteed monthly income then be sure to subscribe to our notification list so you can stay in the loop and we'll let you know about any new training we put out.

As I stated in the beginning of this article, online stock option trading is truly the secret tool of the wealthy.

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A Candlestick Chart

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This lesson will serve as an overview of the candlestick chart. Learning about candlestick charting can be quite extensive, however I will provide you with the basics to get you started.

The basis of the candlestick is said to have originated around the 17th century in Japan.

The Japanese used this style of charting (technical analysis) to predict rice prices.

A legendary rice trader named Homma from the town of Sakata is said to have made a huge fortune using candlestick analysis.

Over the years candlestick charting has been modified and refined and Steve Nison is credited with popularizing the style of candlestick charting that is used today.

If a picture is easier for you to look at than bars and lines then the candlestick chart will work perfectly for you. In order to create a candlestick you need the same price information as a bar chart; the open, high, low, and close.

Since the candlestick shows you the same price information as the bar chart then you may be wondering why to even use them. One reason to use the candlestick is because it gives you a better pictorial representation of the price action.

The box, or rectangular portion, of the candle provides unique visual clues that make reading price action easier. These visual clues make them more appealing than the standard two-dimensional bar chart.

Below are examples of candlesticks with explanations for each candlestick component.

**In each picture I have also included a bar so that you can see its equivalent and compare the differences.**

**We will refer to the candlestick as if we are talking about a daily stock chart.**

The picture below right is an example of what a bar and candle look like if the price of the stock closes higher than it did the previous day. There was a lot of buying pressure so the stock closed higher for the day.

The box, or rectangular portion, of the candle is called the body (also referred to as "the real body"). This represents the price range between the open and close for the day.

The tips of the thin lines above and below the body are called shadows (also referred to as "wicks" and "tails) and represent the stock’s "high" and "low" price for the day.

When the stock closes higher for the day the body (rectangular part) of the candle will be white or green.

The bottom part of the body represents the opening price for the day, and the top part of the body represents the closing price for the day.

If you recall from the bar chart lesson the horizontal line extending to the right of the bar represents the closing price of the day. If the horizontal line on the right is higher than the horizontal line on the left then you can easily see that the stock closed higher than it opened for that time period.

The problem that arises is that when you have several bars on a chart it becomes harder to see each individual bar. The candlestick chart alleviates this problem because the "body" of the candle is easier to see.

In this example there was a lot of selling pressure so the stock closed lower for the day.

If the stock closes lower than it opened then the body of the candle will be black or red. This time the opening price is at the top of the body and the closing price at the bottom.

When the stock closes "higher" for the day, the candlestick will be "white or green", and when the stock closes "lower" for the day, the candlestick will be "black or red".

If the body portion of the candle is long and stretched out this represents a large price difference between the opening and closing price of the stock. If the candlestick is short and not very long in length this represents very little price movement for the day.

Here are how the candlesticks look on a stock chart.

I hope this lesson has helped you to at least understand the basic mechanics of a candlestick chart. There is a lot more to learn about candlestick charting.

There are at least 12 major names for the different shapes of the "body" and "shadows". Names such as Doji. Graveyard Doji, Shooting Stars, Hammer, Hanging Man, etc. Learning about candlestick charting is a course all on its own.

But don't let that deter you. The traders I know that use candlesticks are extremely passionate about what they do and they swear they will never go back to the bar chart again.

I think part of the reason I stick with bar charts is because they are easier for me. It's what I learned how to trade off of and it works for me. I guess it's like the saying, "you can't teach an old dog new tricks".

Ultimately find what works for you!

If you're ready for the next lesson then proceed to Lesson 5: Trendlines.

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Online Option Trading | 5 Need to Know Facts About Trading Stock Options

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You ever heard of online option trading?

If so, then you've probably seen some get rich quick ad promoting options trading as the key to all riches and glory.

Now I admit, I have earned more than 100% return on my investment several times, but to state that this is guaranteed would be misleading.

Here are a few facts that I have gathered over the years as I've traded options.

Fact 1: Sadly, I've seen more people fail then succeed

We won't go into the reasons why, but I just wanted to put that fact out there. As I tell my options coaching students; be realistic. It would be nice if everyone could succeed, but sometimes things don't quite work out that way.

So what is online option trading anyway?

Essentially it's the same thing as options trading. It's just another way to say you are trading options online, usually through an options broker like Thinkorswim or OptionsXpress.

Option trades were once made over the phone through a full service broker. Now with the influx of discount option brokers you can place the same trade online in a matter of seconds with the click of a button.

One thing to keep in mind is that with discount option brokers you have to do all the research yourself. All they do is provide the trading platform for you to trade with.

Fact 2: You DON'T need a lot of money to get started with online option trading

Actually you don't need any money. Most option brokers allow you to set up a demo account (paper trading account) to practice with. You can learn how to trade from this site, or some other one, and then practice your skills without risking any money.

When it comes to using real money it would help if you had a lot ($10,000 - $30,000), but it's not needed. I once took $90 and bought a stock option and wound up making a $240 profit or 267% return on my money.

And I was only in the trade for 15 days. I admit, it was part skill, part luck.

Fact 3: You DON'T have to be an expert on finance and stocks in order to participate in online options trading

I've led many people down the road to successful options trading and one thing was in common with all of them. They were ALL average ordinary folks with regular jobs. There were no wall street whiz kids or multi-millionaires in my options trading classes.

Fact 4: If you buy a stock option there will ALWAYS be someone to sell it to. Most people are scared that if they buy an option they will get stuck with it and won't be able to sell it.

That's so not true. What people don't know is that the Options Clearing Corporation ensures that there is always a buyer and always a seller for each and every options transaction (even if they have to take one of the sides).

Fact 5: Trader Travis (me) will NOT teach you how to get rich quick

Even though most of my students are doing fairly well and one even doubled her retirement account I do not teach a get rich quick strategy. It's actually a very boring (yet profitable) 4 step system to trading the markets.

Online option trading is very profitable, but it's not as easy as folks make it out to be. It can actually be rather tricky at times. So if you're in a hurry to make money, don't be.

Just take your time and realize that the stock market isn't going anywhere.

To see real results from real people be sure to check out Michelle's story as it shows what's possible when you invest in yourself and accelerate your learning curve by enrolling in an option trading course.

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