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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Call Option Trading | Earning Big Bucks When Stocks Go Up in Value

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Buying a Call option is a low risk way of profiting from a rising stock. An investment in a stock option cost as much as 90% less than buying the stock, yet you can make the same amount of money.

And you have less money at risk of being lost.

Most people invest in stocks to make money which isn’t smart.

You should invest in stocks for ownership. If you want to make money just buy stock options.

It will cost you a whole lot less and you can make the same amount of money.

Let's say you bought an IBM July 95 "Call option". This stock option gives you the "right to buy" IBM stock for $95 on or before the 3rd Friday of July.

Now imagine that IBM comes out with a new product and the stock shoots up in price to $127. You own a contract (Call option) that says you can purchase it for $95 a share.

Think shopping, you get to buy it at a $32 discount when everyone else has to pay the full retail price.

So as the stock goes up in price, the 95 Call option goes up in value. A $140 stock price means you get a $45 discount in price etc. etc.

If the stock falls in price to $50, then no one will want to buy your option and it will essentially be worthless.

Who would want to purchase a contract that gives them the right to buy a stock for $95, when it's selling for a cheaper price on the open market?

If you bought the option while the stock was trading at $50 and exercised the rights of the contract you would have to buy the stock for $95. You would pay $95 for a stock that is trading for $50 on the open market. You'd immediately be at a loss of $45!

That's the equivalent of someone trying to sell you a car for $2,000 when the car is selling everywhere else for $1,500.

So when an individual believes that a stock is going to rise in price, they can profit from this movement by purchasing a stock option.

You would cash in your profits by either selling the Call or by exercising the option and then immediately selling the stock.

I have looked up the option's actual historical prices to show you how this IBM trade would have looked if a trader decided to sell his/her Call:

These were the actual historical prices from the option chain. As I mentioned in the buying Put options tutorial, the in-the-money (ITM) options "generally" rise in value dollar for dollar with the stock price.

If you will note in the calculations above, the stock price of $127 minus the strike price of $95 equals exactly $32. The investor bought the At-The-Money (ATM) option for $7.

From this point the option moved up in price dollar for dollar with the stock price.

You can also use Calls to lock in a good price for the stock.

If the investor feels that the stock may rise in price, but doesn't quite feel comfortable risking a significant amount of capital he/she can buy a call option.

Once the stock does in fact rise in price, he/she can now exercise the rights of the contract and buy the stock. Let's take a look to see how the trade turns out when the investor decides to exercise the rights of the option contract:

At this point the investor can either hold onto to the stock or immediately sell it on the open market for $127.

If the stock did NOT rise in price and instead traded below the $95 strike price then the option would be Out-of-the-Money (OTM) and its value would decline.

If the stock continued to fall or you reach the option's expiration month then its value will eventually fall to zero dollars, costing you 100% of your investment.

You will often hear people talk about options expiring worthless. This is the term used for when an option falls in value to zero dollars.

So when you feel a stock is going to rise in price you can either buy the stock outright or use a call option. Using stock options just adds leverage.

The choice on which to use is up to you. Pick the one that best meets your investment objections.

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A Complete Options Animal Review | Is it worth it? Is it a scam?

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A rare Options Animal review...

If you've been searching the web for options trading education you may have seen a website call www.optionsanimal.com

I was contacted by one of their associates to see if I would be willing to do a review on their educational platform.

They are a fairly new company, as far as their web presence, and they wanted feedback from other traders on what they could do better and also let the public know the most pressing questions...

Who are you?Do you know what you're talking about?And is options animal one big scam?

And this will be a "real" review. Not like those other thrown together garbage reviews you read online where it sounds like the writer is "in bed" with the company.

As most of you know, I try to keep my priorities in alignment. I try to make sure family time is high up on the list and anything that takes me away from my family comes at a premium.

In light of that, they agreed to pay me a small fee to do a review; enough to take my wife out to a nice dinner. The money means nothing to me as I'm a flow-through corporation; my money flows through me and goes straight to my wife ha ha ha…

Anyway, back to business...

I rarely do reviews and I certainly stay away from doing reviews on people who teach trading.

This industry is filled with way too many people who just don't have your best interest at heart. I refuse to even be remotely associated with any of the scam companies out there.

I explained this to OptionsAnimal and also explained that I would be surveying my readers to see if they had any bad experiences with this company.

I surveyed over a thousand people and based on their feedback I decided to do the review. I'll place their feedback in this review.

I had a chance to speak with Greg Jensen, the founder of options animal on the phone before I did my review.

Greg started trading in the mid-90s after graduating from college. As he started having some success he eventually moved to full-time trading and during this time period people kept asking him if he would help them learn options trading.

Since he had a passion for educating others, he started working for a company who taught trading to individual investors. Fast forward a few years and Greg's educational partner was in jail from shady business practices and Greg was left holding a bag full of passion and still wanting to reach out to traders.

From this experience he created optionsanimal.com, where they would be educators who are also traders. Traders first; educators second.

**Trader Travis's interpretation: he wanted to be involved with a business where the primary focus was educating you instead of the primary focus being taking advantage of you.**

Your first introduction to options animal will probably be in the form of one of their free options trading classes. They host several free trading webinars each week giving examples of the trades they make and also giving you more information on their options trading training.

I didn't see any prices on their website for their trading classes, so I signed up for one of their free trading webinars. It was informative and gave you a good chance to see how they trade individually and also how they adjust their trades.

As a matter-of-fact, Greg stated that "how to adjust trades" and flowing with the market instead of being a victim to it, is one of their core strengths.

They also go through the website to show you how everything works. Towards the end of the webinar the gentleman explained they create custom packages for you based on your own trading needs. Thus, why there are no prices listed on the website.

As I was doing my own research on options animal the number one complaint I heard was they were too pushy in their sales process. It's impossible to validate other people's experiences, but I attempted to recreate it and I had no issues.

I joined their free options trading classes via webinar and it was the normal...we teach you content, and then offer our services.

They ask for phone number at the end of the webinar and tell you to call in the next 30 minutes to get a discount and the second year of learning at no extra charge. They say it's only available for the next 30 minutes so maybe people felt pressured.

I even called their customer support and pretended I was someone else. I was on hold for 3 minutes and 30 seconds waiting for someone to talk to me about the pricing.

Without going into a long drawn out spiel on pricing just know you'll invest between $500 - $9,000. Yes I know that's a wide range so contact them so they can explain why. And if you don't know $5,000+ is industry standard.

Trading changes your life and sets you free financially so I'll pay that all day any day.

So I did not have any bad experiences or get the impression that they were trying to scam me, but then again maybe I've been doing this so long I'm immune..who knows.

They offer a performance guarantee that if you don't make money after graduation then you'll get a refund of the tuition paid minus a $500 admin fee. And oh, be prepared to sign a 2 page performance guarantee agreement.

You'll have no shortage of trading information as they offer over 30-40 live classes a week. The classes are in several different formats including on demand pre-recorded learning and live learning. And the training materials are also archived so you can watch and listen to them later.

Since there are several different instructors, you can listen to classes based on a particular instructor. If you happen to like one instructor over the rest then you can only listen to the classes that he or she facilitates.

In the actual learning models you have 2 options. You can learn by watching the pre-recorded classes or you can register for the live version of the training and there are test at the end of each module to reinforce the learning material.

I'm going to do optionsanimal a huge injustice right here as there is no way I can adequately cover just how much they offer. They seem to be a solid company with solid educational material, but it was just too much of it there for me to review it all.

They have eight different learning levels and each level has roughly 6-10 lessons in it. There was literally hundreds of hours of education (this includes the archived training).

So no matter how much you spend you should get your money's worth. It's also laid out so that learning is not such a daunting process.

Here is a "brief" overview:

Lessons 1-3 are a good in depth overview of trading and covered the more basic strategies. Here are some of the topics you will learn:

Stock market basics, fundamental analysis, technical indicators and stock chart reading, technical and sentimental analysis, evaluating economic events, defining options the greeks and volatility, basic spread trades, the protective put, covered call trades, collar trades, and applying the straddle/strangle.

Lessons 4-8 is where you're learning is upgraded. Here are some of the topics you will learn:

Call spread trades, applying the bull call spread, applying the bear call spread, applying the call calendar, put spread trades, applying the bull put spread, applying the bear put, applying the put calendar spread, the protective call, portfolio management, technical analysis workshop, practical application workshops, adjusting your losing trades to make a profit (bold), adjusting the collar trade, bull puts, bull calls, calendars-straggles and strangles, ratio spreads, winged spreads, double diagonals, synthetic collars, and the exploding collar.

Again, this was a brief overview. I've seen snippets of most of the trainings. So rest assured it's all there laid out with explanations and real trade examples.

They have several other additional offerings you might like. They have a section of the site where they share their personal trades with you and they also have a community forum. And they have live student summits a few times year where everyone goes to meet each other and learn in a live real time setting.

Summits provide an opportunity for current students and graduates to expand their investing expertise in a relaxed atmosphere. Each Summit has its own trading strategy focus and unique agenda, all events offer a well-planned mix of instruction, fun and entertainment. Their next one is in Hawaii (yeah I'm jealous).

I'm a regular guy who grew up extremely poor and I have discovered that yes you can make money trading options and there is NOTHING that is scammy about options trading.

What I have found is that those who feel it is "too good to be true" are always those who have 1.) never traded options and just repeat what they have heard or 2.) traded options and failed.

You owe it to yourself to learn how to trade options successfully in some way shape or form. As I've said before and I will continue to say: I don't care WHO you learn from, but I do care that you LEARN.

Find someone you trust and that makes you feel all warm and fuzzy inside and pay them to teach you.

Yes I said pay them. You learn better when your hard earned cash is on the line. And I can prove it: have you read all those free 100 page Ebooks you've downloaded online?

No, you downloaded just like me and you never quite get around to reading them.

They're free so you having nothing to lose by not reading them. You know they were free and will always be there so they always fall on the list as low priorities.

Makes sense doesn't it?

That was my biggest break through when I finally coughed up money to learn. I realized that I actually put the material into action and actually achieved real results.

Imagine that concept: take action, get results…compared to take no action, get no results.

I can't advise you on whether you should join optionsanimal or not, but I checked them out and they seem to be okay. If you find out otherwise please let me know.

Go to http://www.optionsanimal.com/ to learn more.

**Note** I have zero experience with being a member of their community so if you have any questions about them you can contact them here.

I do not have enough knowledge to answer questions about them. Everything I know I put here in this review.

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Options Mentoring Helped Me Double my Retirement Account

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by Michelle F.
(www.destinysolutionscorp.com)

Thanks Trader Travis!

I started investing in stocks when I was 6 years old. As I got older and started working in the corporate world, I invested every dollar I could in 403B's for my retirement. I believed, like many, that mutual funds were the way to go.

In the financial meltdown of 2008, my accounts were devastated and I became so exasperated that I called my Fund Managers. These "professional" investors told me, "Well, everyone had losses, we all lost money . . . it'll come back."

What really bothered me was the fact that they still charged me tens of thousands of dollars in fees - TO LOSE MY MONEY!

I was extremely frustrated, to say the least, and decided at that moment I had to take control of my money. I researched training tools to learn how to trade stock options.

I found everything from really advanced options trading courses that cost up to $25,000 to teasers that taught you just enough to be dangerous, but still stuck you for thousands of dollars. In my opinion, all were mostly theory and I wasn't seeking theory - I wanted to learn the nuts and bolts and get my hands dirty.

Luckily, I found http://www.learn-stock-options-trading.com/.

When it was announced that Trader Travis was starting an options coaching class, I couldn't wait to get in. I'm so thankful to him for taking time away from his family to teach us how to trade stock options!

I quickly learned the basics and was thrilled that it was reasonably priced and the content was not "over my head."

The explanations and examples provided during Travis's comprehensive and practical lessons were exactly what I was looking for! I have learned so many things from coaching and from my classmates that I no longer feel "just dangerous."

I now have a skill that I can rebuild my retirement account and actually create a weekly earning, FOR LIFE.

Needless to say, I have fired all of my "professional funds managers!" In a very short period of time, I have taken what was left of my retirement account and increased it 163%.

I feel so confident that I can trade options and make a profit that my fiancé and I have started investing for our friends and family.

Our efforts have become so successful that we have incorporated to legitimize my new skills and are beginning to invest money for other people. We are officially called Destiny Solutions Corporation.

All of this because of a small investment in options mentoring.

Thank you so much Trader Travis and please be sure to give your wife and son my love,

Michelle F.

Note from Trader Travis: This type of success is not typical and I'm supposed to tell you what typical is. Well I'm sorry to say that I have no idea what typical is because each trader is different. And with anything in life there are always people who purchase products and do nothing with them. I will however tell you that these types of returns are not unusual and I have several student emails to prove it.

If you want to be notified on when the next coaching class will take place then sign up for our free option trading newsletter.

Marketclub Review | Marketclub is the BEST Stock Trading Software Around

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This Marketclub review will summarize my actual use of the service thus far. I'd like to say that it's the best stock trading software around, but it's so much more than that.

Seriously, it's like an oasis of trading tools and education all designed to help you become a better trader. Marketclub has even become a common term used around our house.

Not too long ago I had my stock charts up and I was reviewing the charts one-by-one and my wife walked in and said, "Wow, I haven't seen those in awhile. That used to be what was always on your computer screen."

I explained that I don't have to review them each night anymore because I automated the whole process using Marketclub's platform.

Okay...enough of my ramblings, let me move on to the Marketclub review...

With Marketclub you can research and use their tools for stocks, futures, metals, forex, ETF’s and more. However, I'm an options trader so my use of the service is strictly limited to the stock side of things.

Please keep this in mind as you proceed through this Marketclub review because invariably I will leave out a ton of other things that the service offers.

Here are just a few of the tools you will have access to once you join Marketclub:

Trade Alerts
You can set up trade alerts to be notified of net changes, new highs and lows, changes in trend score, breakouts, or when their "Trade Triangles" have been issued for one or all of the symbols in your portfolio. Trade Triangle Technology
In the past, I would frown upon stock trading software because I felt that the people selling the systems were selling pipe dreams. However, Marketclub seems to have the best stock trading software I've seen thus far.

This is only based on the accuracy of their buy and sell signals. I'll show you this later in the video portion of the Marketclub review.

Talking Chart Technology
When you are reviewing your stock charts you can click on an icon and an audible voice will come on tell you what is going on in the market.

I've only used this a few times. Depending on what mood I'm in, I tend to get annoyed with the voice. Don't get me wrong, it's a great feature, I just have issues (smile).

Smart Scan
I consider this the lazy way to trade, because it finds trades for you. This tool literally scans through all of the stocks in their database and identifies charting patterns that are primed for large moves.

They have several parameters to choose from in order to find these stocks.

Trade School: Online seminars from the world's top trading expertsData Central: Unlimited downloads for over 230,000 symbolsPremium Stock ChartsPortfolio AnalysisDiversified Research in stocks, futures, metals, forex, ETF’s and more

The services that they provide are all web-based so there is absolutely no software to download on your computer. I happen to like this because I don't have to drag around my laptop everywhere I go.

The rest of the Marketclub review will be based on how I've used the service in my daily trading.

Each trader has his/her own needs and my needs as an option trader are very different than the needs of a stock trader. Marketclub has helped me with my trading, but they are a little weak on the options trading side of the things.

I'll give you an overview of how I've used the service thus far and I will follow up with a video showing you some of the trade signals produced by the Marketclub software.

Since Marketclub is not set up for option traders, I've used their stock buy and sell signals to assist me with getting in and out of trades.

Once you join you will have access to over 230,000 securities to trade, but I'm bias though. I don't just trade options on any stock, only the best so...

I upload my Investors Business Daily (IBD) stocks into my Marketclub portfolio.I then go to the alerts section of the site and set up custom alerts that will e-mail me once my stock has produced either a buy or sell signal.If I get a buy or sell signal, I log in and look at the stock chart. If the stock has a strong trend score, and I like what I see, I'll then look up the option chain for that particular stock.If all goes well, the next day I will enter the trade and again set up alerts to let me know if the stock starts trending against me.In addition, each night my entire portfolio is analyzed by Marketclub's software and I receive an e-mail letting me know how all of my stocks are doing trend wise.

If I see anything promising, I may put it on my stock watchlist for the week and may not even wait for a trade triangle signal. I would use a few technical indicators to guide me into the trade.

I'm still getting used to trading with the assistance of a computer. It still feels weird and it's taking me awhile to fully trust a system like this.

I can clearly see that the trading signals work, it's just that I've been trading the old fashioned way for so long it is hard to make the shift.

***What helped my confidence is that I was able to back test the trading signals and that increased my confidence in the service.

The buy and sell signals are never removed from the charts so you can go back in the past (back test) to see how well they worked.

Here's a quick note from the help section on the site:

***"The triangles will always be produced regardless of trend strength. The triangles should be used when you have significant trend strength. You can use the Trend Analysis Score or other technical analysis studies to ensure the trend strength is appropriate for trading. For example, if a market is in a sideways motion, the triangles will still be produced even though you may want to be on the sidelines for that particular market.***

I couldn't have said it better myself. I do in fact use the trend analysis score and only trade in trending markets.

Whenever I can squeeze in some free time, I usually try to enroll in one of the 35 audio seminars they have available on the site. You even get a PDF workbook to go along with each class.

One of the readers of this site has enjoyed the service so much he sent me this testimonial:

-----------------------------
First Name: Andy
Location: New Zealand
Comment: "Hi Travis,
Hope you are recovering well from your surgery. I'm really enjoying Investors.com and Marketclub and continuing to learn heaps from your website..."

Andy P.
------------------------------

Andy didn't have the luxury of reading this Marketclub review. He took a leap of faith and now he is reaping the rewards.

I know it's a good service, but sometimes it helps to hear it from other people. Here are more testimonials about the service.

With that being said let me do a quick Marketclub Review via video:

This Marketclub review would not be complete without a list of likes and dislikes.

Here are a few of my likes and dislikes summed up:

Dislikes They don't really cater to option traders so you have to be creative in how you use the serviceEither their option chains don't work or I couldn't figure out how to use them. I gave up, I just look them up in my brokers accountI wish there was a quicker way to scroll through my stocks in my portfolio. It takes too long to go from one stock to another.There is no quick start guide. When you first join you are looking at an enormous amount of information and you don't quite know what to do with it

Likes They have several new member videos to get you up and running with the serviceThe enormous amount of information available on the siteTheir buy and sell signals are accurate enough to make a profitThey are constantly looking to add new tools and they provide weekly market analysis videosCustomer support are very easy to get a hold of and were very pleasant when I talked to them over the phone

After performing the Marketclub review I decided to give Marketclub a rating of 8/10 and highly recommend it to others. This says a lot about the service because I'm very slow to trust people marketing trading tools.

I've been burned/scammed so many times in the past, I'm always a little slower to warm up to people.

Adam Hewison also has my respect because of the promises they make to YOU.

I enjoy using the tools and they work for me, but that does not mean it will work for you. The only way to find out is to try out the service for yourself.

Use MarketClub's Trade Triangle and other online tools risk-free for a full month and see the difference it can make in your own trading!

To arrange a Risk Free 30 day test drive, visit the link below:

Don't be left out, Join Marketcub Today!

To Your Success, Trader Travis

P.S. Don't forget that the readers of my site who join Marketclub will receive a quick start guide that I created. I mainly created it to help myself navigate quickly around the site and then I realized that others could benefit from the knowledge.

To receive the guide just fill out the form below and I'll send it right over.

Return to the top of this page, "Marketclub Review"

Return to Learn-Stock-Options-Trading.com

All things Market Club: The links below take you to all the articles I wrote about the Market Club Trading Service:

Buying Put Options | Profiting When a Stock Goes Down in Value

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AppId is over the quota

Buying Put options are how you make money when stock prices are falling.

Most investors watch the stock market fall and grumble about how much money they are losing.

During these times, dollar cost averaging doesn't seem to soothe the soul.

Before I became an option trader I used to get tired of watching stock prices fall and feel like there was nothing I could do about it.

Buying Put options completely eliminates that helpless feeling.

You feel more in control because you are able to make money on the way down.

Buying Put options are a way to profit from a downturn in the stock market without shorting the stock. Short selling is beyond the scope of this lesson however if you understand the concept of shorting stocks it will help you to understand the power of Put options.

In the previous two lessons we discussed how Put options are used as a hedge (insurance) against a decline in stock price. This lesson focuses on yet another use, buying Put options to trade them for a profit.

You are going to buy Put contracts that you think will increase in value. Once they do increase in value you will sell them at a higher price and pocket the difference.

A Put option gives its buyer the right, but not the obligation, to SELL shares of a stock at a specified price on or before a given date.

Buying ONLY Put's should not be confused with Married Puts or Protective Puts. Married and Protective Puts are purchased to protect shares of stock from a sharp decline in price.

The major difference between the two is with Married/Protective Puts there is "ownership in stock".

Buying Put options involves just that, buying only the Put option.

When you buy only the Put option it completely changes the dynamics of the trade. You want the stock price to fall because that is how you make your profit.

In "most" cases you never intend on exercising your rights to sell the stock. You just want to benefit from the movement of the stock without having to own the stock, and you can do this with Put options.

A put option locks in the selling price of a stock.

So if you buy an option with a strike price of $70 this will allow you to sell the stock for $70 anytime between the day you buy the option and when it expires.

So if the stocks falls to $60 your put option will go up in value. Why, because you hold a contract that gives you the right to sell something for more than its market value.

Yes this seems unfair and logically this doesn't make sense, but this is just the nature of the terms of the option contract.

It's like baseball cards. Baseball cards are literally pieces of cardboard, yet some of them can sell for thousands of dollars because there are only a limited number of them in the world. Because only a limited number are available it makes the cards more valuable.

With a put option you hold a contract that lets you sell something for MORE than it's worth. This makes your contract more valuable so you essentially turn it around and sell it at a higher price.

Since a stock can fall to $0 the maximum profit you can make with a put option is when the stock falls to $0. Put options gain value when stock prices fall and there is only so far a stock can fall in price.

In the next lesson you will see a real example and how it works, but for now let's cover the risk.

The max you can lose with a put is the price you paid for it (that's a relief). So if the stock goes up in price your put will lose value. So if it cost you $100 to buy the put that is as much as you can lose.

It's better than losing thousands of dollars if you were to purchase the stock and it fell in price.

Allows you to participate in the downward movement of the stock without having to own or short the stockYou only have to risk a relatively small sum of money to buy a Put OptionThe maximum amount you can lose on a trade is the cost of the PutLeverage (using a small amount of money to make a large sum of money)Higher potential investment returns
The Put option has an expiration date so time works against youThe stock has to make a move downward in order for the Put option to increase in valueIf the stock stays flat or doesn't move, then the Put option will lose value due to time decay
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Stock Options Trading - Options Trading Explained Through a Real Trade

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AppId is over the quota

Stock options trading helps investors who are tired of losing money in the stock market earn 2-5% each month without being glued to the computer all day.

With traditional investing you can only make money when stocks go up, but options trading can help you to never suffer a major loss in your portfolio ever again.

Watch the short informative video below and then finish up with the text lesson below the video:

In this lesson you will see how people use stock options to participate in the movement of stocks they are watching.

Stock option contracts grant you the "right", but not the "obligation", to buy or sell shares of a stock at a "set price" on or before a give "date" (time period).

Stock options trading is the buying and selling of those contracts.

As a stock option trader you're going to 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.

1 stock option contract = 100 shares of a company's stock. So when you buy 1 contract you are buying the right to buy or sell 100 shares of that stock.

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.

You do some research into the healthcare industry. You find a good company and based on your research you feel the stock price will increase over the next few months. The companies name is Humana, Inc. and the ticker symbol is (HUM).

You look up the stock price and "HUM" is currently trading for $42 a share. You buy 10 option contracts that give you the "right to buy" 1,000 shares of "HUM" at a "set price" of $45 anytime between now and March (time period).

The underlying security: HUMThe expiration month: MarchThe strike or purchase price: $45The type of option: Call, the right to buy stock

The contracts cost you $1,665. That is what they were worth the day you bought them when the stock was trading at $42 a share.

This $1,665 is a small price to pay compared to the $42,000 you would have paid if you bought the stock outright ($42 * 1000 shares).

Eight days pass by and the stock price of Humana, Inc. increases in value as you expected. The stock is now trading for $46 a share.

Your contract is now worth more money and you essentially turn around and sell it to someone else for lets say $2,534. In doing so, you would make a quick $869 or 52% return on your money. Not bad for 8 days of work.

That's stock options trading at its best!

***Please don't worry about who you're selling your contract to or why they would buy it. For now just focus on the fact that you have a contract that's worth more than what you paid for it and you're going to sell it and pocket the difference.

Still unclear? Let me explain stock options trading this way...

Remember in an earlier lesson how the land contract went up in value as the underlying asset it was tied to (raw land) went up in value?

Now we have a stock option contract and its value also goes up when the underlying asset it's tied to (stock) goes up in value.

Now that I've explained stock options trading (the buying and selling of option contracts) you may be saying to yourself, "yeah right, it sounds good in theory, but those numbers in the "HUM" example are not realistic". Fair enough!

In one of the previous lessons I told you I would explain option trading and also show you how profitable it can be.

What better way to show you then a real life example. That Humana, Inc. example above was a real trade I made.

I made $869 and a 52% return on my money in 8 days.

That's the power of stock options trading!

If I were looking to earn a better return on my money than my mutual funds, then I'd be done right here. I wouldn't have to make another trade for the rest of the year.

Heck, I could take two years off and still beat my mutual fund. I'm joking but I think you get my point.

And if you are "not" earning the types of returns shown above then I highly suggest you consider the Options Coaching Program. In our Options Coaching Program I can show you the same simple 4-step process I use to make trades like the one above.

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Free Trading Videos | A List of Trading Videos from Marketclub

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AppId is over the quota

I've compiled a list of free trading videos brought to you by Marketclub and Ino.com.

I get several of these videos via e-mail so I figured I would create a place on the site where you can watch the videos at your leisure.

Adam Hewison, master trader and co-founder of Ino.com, usually makes the videos.

Not all of the videos he creates are specific to the needs of an options trader so I will only post the videos I think are relevant to stock or options trading.

Click Here for the 7 part traders whiteboard series.
Adam created the traders whiteboard series to help traders understand and benefit from his years of real world experience both in the pits of Chicago and from Geneva, Switzerland.

Free Trading Videos (the newest videos are at the top)

What does future hold for the Dow?
The Dow jumped to new highs for the year, extending its gains from the lows seen in March. So what does this mean for the future?

Has the S&P broken final support?

Has the S&P Index Topped Out for the Year?
There is compelling evidence that we may have seen a top in the S&P index. In this short video, Adam shows you the evidence that he has found which may point to the fact that we are going to see a correction in this index.

Is a divergence building in Apple?
In this short four minute video, Adam will explain some of the possible negative divergences that are building for this market. Divergences do not mean that Apple is going to collapse, as the major trend in the stock remains firmly in the positive camp. However, it could indicate that Apple is at a highpoint for the time being.

Do You Understand How Divergences Work in the Market?
In this short video, Marketclub will share with you some divergences that are taking place in the S&P 500 right now.They're also going to show you divergences that didn’t work out, what you should look for, and how you should act when a divergence does not work.

Two Major Technical Forces Are About to Collide in the S&P 500
The S&P 500 has seen remarkable recovery from the lows that were seen earlier this year. However, all of that may come to an end as we fast approach a strategic level for this market. There are two major technical indicators that are colliding at a crucial point and time. Unless you're aware of these indicators, it could be very expensive.

Buy and Hold...is it back?
Everyone has heard the buy and hold logic...but how about the other side of the argument? Watch this video so you can learn something about what a REAL trader has to say about buy and hold.

MarketClub Alerts broken down and analyzed!

In case you've been sleeping on MarketClub, then here is another reason why I'm a huge fan...their notification tool titled Alerts. This email alert system gives you the ability to stay on top of the Trade Triangles as well as 18 other breakout patterns!

The Nasdaq cut open and broken down
"Today we are going to be examining the NASDAQ Index. This market, which made its peak in 2000 at the height of the dot com bubble, remains in a secular bear market...We would not be surprised to see more of a two-way trading market before it eventually falls on its own weight and resumes a downward path. This is what we expect to happen, however, we are going to rely on our Trade Triangle technology to give us the perfect timing for that event."

Imagine not having access to any financial news
Imagine not having access to any financial news stories. The only information you have about the market is the market itself. Would you be a better trader or a less successful trader?

In this free trading video Adam takes a big look at the S&P 500 market and explains where he expects it will head in the months to come.

17 Candlestick Formations you need to learn!
Adam points out some of the powers behind using Japanese candlestick charts.

Major signal issued on the Nasdaq
Adam discusses some of the potential downside targets for this index.

All things Market Club: The links below take you to all the articles I wrote about the Market Club Trading Service:

Return to the top of this page, "Free Trading Videos"

Return to Learn-Stock-Options-Trading.com

What are Stock Options - A Simple Introduction to Understanding Stock Options

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AppId is over the quota

This lesson will address what are stock options and how they can help you fire your boss! The main benefit of understanding stock options trading is that it allows you to break free from the limited income rut.

Options trading is by far the most cost-effective way of trading the stock market. And if done correctly it's also the smartest way to invest.

Watch below to see a trade I was in that had a $590 profit in one day...And yes these are real money trades...I like to show you reality so you can see what's possible for you...

If I don't do all I can to get you to believe that these returns are real then you'll remain in disbelief and will never be able to fully accomplish all your income goals in life...

So what are stock options to the average ordinary individual?

In my opinion they don't exist for the average ordinary individual. Stock options are relatively unknown to the rest of the world and understanding stock options takes time.

That's why the goal of this lesson is to give you a basic definition of stock options.

*** For the sake of simplicity, I'm going to refer to options on stocks only, even though options can be traded on commodities and other securities as well.

"Stock options are contracts; they don't represent ownership in anything. They are merely contracts that grant you certain rights".

Definition of Stock Options: If you buy or own a stock option contract it gives you the "right", but not the "obligation", to buy or sell shares of a stock at a "set price" on or before a given "date" (time period). After this date, your contract expires and your option ceases to exist.

For example, a contract at a country club may grant you the right to use the country club whenever you choose to, but you're not obligated to use it. It's not like they're going to send the country club police to your house and make you go there.

A stock option contract grants you the right to buy or sell a specific stock.

1 stock option contract = 100 shares of a company's stock. So when you buy 1 contract you are buying the right to buy or sell 100 shares of that stock.

I have a one year contract with a local gym here. It gives me the right, but not the obligation, to go to the gym whenever I want for a year. They don't make me go, but if I don't exercise my right to go then I lose the money I paid for this right.

After a year my contract ends and I no longer have the right to workout at that gym.

***

Well stock option contracts grant you the rights listed above, but you don't have to buy or sell the stock if you don't want to. If you don't exercise the rights of your contract then you simply lose the money paid for the contracts.

I've tried my best to use everyday examples to aid in your learning.

Understanding stock options can be hard at first and it doesn't help that that dictionary definition of stock options reads as follows:

Stock Option: A right to buy or sell specific securities or commodities at a stated price within a specified time.

Understanding stock options becomes easier once you realize that everything boils down to two components: Puts and Calls.

That's it!

Puts and Calls are the only two types of stock options. Everything else is just a variation or combination of these two.

The "Put" option gives its buyer the right, but not the obligation, to "sell" shares of a stock at a specified price on or before a given date.

The "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.

The definition of Puts and Calls is given here as an overview. We will go deeper into Puts and Calls in one of the later sessions in this module.

In Wall Street circles stock options are called "derivatives". They are called this because the option contracts are derived or come from stocks.

Your children are derived or come from you. Cheese is derived or comes from milk. Stock options are derived or come from stocks. You can't have the latter without the former.

The only reason cheese exists is because someone wanted another way to consume a milk product. So someone created or derived cheese from milk, it's the same with stock options.

A stock option only exists because someone wants the right to buy or sell a certain stock, so an option contract is created based on that particular stock this person wants to buy.

Another aspect of derivatives (stock options) is that the options price follows the rise and fall of the stock price. When the stock's price rises and falls, the option's price rises and falls.

Don't worry about making sense of derivatives. This information was given in case you hear someone on TV talking about derivatives. Derivatives are highly traded so they are talked about frequently on CNBC.

So what are stock options...they're derivatives.

That's actually their proper name, but you'll hardly hear me use that term. It's too nerdy for me and when it's used it makes understanding stock options that much harder.

An option is a contract that conveys to its holder the right, but not the obligation, to buy or sell shares of the underlying security at a specified price on or before a given date. After this given date, the option ceases to exist.

An option contract can be broken down into four components:

Underlying Security - Options are based on an underlying security (stock). That means each stock option is linked to a stock. So, a specific company's stock option is linked to that specific company's stock, and the price of the option will rise and fall with the price of the stock. **Not all stocks have listed stock options**Right, Not Obligation - Owning an option gives you the right, but not the obligation, to buy or sell the underlying security (the stock) at a specified price.Specified Price (strike price) - Owning an option gives you the right to buy or sell a stock at a specified price. Listed options have been standardized to represent specified stock prices.Time - Your right to buy, or sell, the underlying stock expires on a given date. The period of time the option exists is also known as the life of the option. After that date the option ceases to exist, the stock does not go away but the option does.

"Stock options" are often called derivatives because they are derived from stock prices.

And if you want frequent updates on our trades and lessons then check out our option trading newsletter.

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Trading Stock Options - Options Trading Example of How to Trade Stock Options

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AppId is over the quota

Trading stock options is essentially the buying and selling of options contracts.

Logically that makes no sense nor helps you see how you can make so much money doing so, but stick with me for a second and let me walk you through an example.

In the following video...

You'll see 2 trades that made roughly $1,000 profit in a few days...And you'll see how a small stock price movement produced a 40-50% return on investment in only 3 days...

This lesson will bust the myth that these type of returns are fake and when you finish you'll have a complete understanding of what's possible for you after you learn how to trade stock options...

An options contract is an agreement made between two parties in regards to buying or selling a stock.

"Real estate investors" buy and sell homes"Stock Traders" buy and sell shares of stock"Option traders" buy and sell contracts

Now I'm going to explain option trading in a way that has nothing to do with the stock market.

This will help you understand how trading stock options (buying and selling contracts) can be so profitable.

Let's say you find an undeveloped piece of land that you believe will increase in value over the next few years. The land is in the middle of nowhere, surrounded by 20 miles of forest on each side.

It's valued at $25,000. You don't want to buy the land outright, but you would like to tie up the land with a contract that gives you the right to buy it at a later date in the future.

So you give the owner some money and he draws up a contract that gives you the "right to buy" the land any time during the next 3 years for a "set price" of $25,000.

You pay him $2,000 for the rights of this contract. You're not "obligated" to buy the land, you've just purchased the "right to buy it".

If you decide not to purchase the land your contract will expire, and you'll lose your $2,000 investment.

Two years later the city has built a new mall 15 few miles down the road. New housing developments have gone up and Wal-mart builds a store right next to the lot that you have the contract for.

Remember you have the "right, but not the obligation" to purchase that lot next door for $25,000 AND you only paid $2,000 for the contract.

Two years ago the land was only worth $25,000 because nothing was around it.

Do you think the land is worth more now that there are malls, new homes, and Wal-mart next door?

Yeah, you bet your bottom that lot is worth more than $25,000. For exaggeration purposes, let's say the lot is now worth $100,000.

You're extremely happy! You own a contract that says you get to buy a $100,000 piece of land for only $25,000.

**On a surface level understanding, can you see how this contract is now more valuable because the underlying asset (the land) increased in value?**

If you exercised your rights of the contract and bought the land you could keep it, or sell it on the open market and pocket the difference between what you sold it for and what you paid for it ($73,000 or a 270% return on your investment).

Please Note: a fact that needs to be taken into account is that if you were to buy the land (exercise the terms of the contract), you would need $25,000 and only then could you sell it for $100,000, thus realizing the profit.

***

Now here is why trading stock options is so profitable:

An options trader would simply take that contract and sell it to someone else.

You own a contract that says you have the right to buy a $100,000 piece of land for only $25,000. Do you think someone might be willing to pay you more than $2,000 to own that contract?

Yes, any person in their right mind would.

So an options trader would simply turn around and sell the contract to someone else for a higher price.

You decide that you don't want to own land and you'd rather sell your contract to someone else.

**You sell your contract to a local land developer for $20,000 and you walk away happy because you just made an easy $18,000 dollars or a 900% return on your investment.**

And yes those types of returns are real. Every now and then I share those with you in the Trading Insight Newsletter.

So now you have an example of how buying and selling contracts can be profitable. It's also probably one of the easiest ways to explain options trading because as an options trader, buying and selling contracts is what you'll be doing.

**Tip** Do not dig deeper into the example. A lot of people try to figure out why a person would let someone tie up their land.

Others want to know why the person who bought the contract didn't just buy the land. Just keep your thinking on a surface level for now. Trading stock options is buying a contract and selling it at a higher price.

Trading stock options is not an easy concept to understand at first so let me give you another example.

Proceed to: How to trade stock options as it relates to stocks.

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A Married Put Position | Protect Your Gains | Hedging with Options

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AppId is over the quota

A Married Put is like insurance for your stock purchase. We are all familiar with car and house insurance, but how many people know that you can buy insurance against a loss in stock price.

It's not actually called stock insurance, but as you will learn in this lesson it works essentially the same way.

It doesn't take much skill to implement the strategy. You just have to understand the mechanics of options and how they work.

All I ever hear is that options are risky and you should stay away from them. After learning about the Married Put, I hope you change your mind like I did. This strategy can save the average investor thousands of dollars.

When I first learned about Married Puts, I was quite upset that my broker or financial advisor had never spoken about them before.

**On a side note**, I wish mutual fund managers would employ this strategy so people don't have to watch their portfolio value plummet during bear markets. In any other industry you'd be fired if you didn't perform, but oh no, not mutual funds. They just tell you to keep investing more by dollar cost averaging.

That's okay though. You can use options trading to make up for those losses!

To understand this strategy you have to remember that a Put option gives its owner the right, but not the obligation, to sell a certain stock at a specified price on or before a specified date.

Establishing a Married Put position is what the investment community would consider as hedging your investment.

The best way to understand hedging (establishing a Married Put) is to think of it as insurance.

When you buy insurance you are protecting, or hedging yourself against an unexpected event. Much like the insurance you buy for a car.

Imagine you bought a car for $10,000. You would most likely purchase insurance for your car to protect yourself against accidents, burglaries, etc. You pay an insurance premium and that's it, you're now insured.

If you were to wreck your car the next day and it's rendered a total loss, the insurance company would issue you a check for the value of the car $10,000.

So essentially the only money you lost was the insurance premium you paid. In a sense Married Puts work the exact same way.

Let's take a look...

A Married Put is when an investor purchases a Put option and at the "same time" purchases an equivalent number of shares of the underlying stock.

The two are joined as one. There are two components to the position, a Put and a Stock, however both of them together make up the position.

If you get rid of one of the components (they get divorced) then you no longer have a Married Put position.

This position is established when an investor wants to purchase insurance against a possible decline in the stock price.

No matter how much the stock falls in price during the option's lifetime, the Put grants the investor the right to sell shares at the Put's strike price up until the options expiration date.

Keep in mind: 1 stock option contract represents or equals 100 shares of the underlying stock.

So in order to implement the strategy correctly you need to purchase a number of put contracts equivalent to the number of shares held.

An investor buys 100 shares of XYZ stock @ $90. As protection against a price decline, he/she also buys 1 XYZ March 90 Put for $2. Your cost basis in this trade is now $92. So the stock would have to move up in price to $92 before you break even.

Once the stock moves above $92 the investor will have a profit on the overall position. The maximum gain on this position is unlimited since there is no limit to how high the stock can go.

The important part, and primary objective of this type of trade is seen when the stock price declines.

The purchase of the Put guarantees the investor a sale price of $90 for the stock. So no matter how far the stock price falls the maximum loss is limited to what the investor paid for the Put option, $200 ($2 * 100).

Without the Put your maximum loss is the entire $9,000!

Can you see how this is like an insurance policy to protect your stock from a big loss?

Of course if the stock doesn't drop in value the Put will expire worthless, but as with any other insurance policy, you should recognize that this is merely the price of protection.

After all, if you buy auto insurance and don't have an accident you don't feel cheated, do you?

When the Put expires you can buy another Put to continue the protection. When you car insurance policy comes up for renewal don't you usually renew it? Well it would be wise to renew your stock insurance also.

The premium paid for the Put option eats into your profits, but spending a small amount of money to protect a larger investment is not such a bad deal.

It's considered unwise to live without car and house insurance so the same thing should apply to stock investing.

Do you remember Enron, Bear Stearns, etc.? How many investors would have been protected if they also bought a Put on those stocks?

Heck, I've got a few battle scars of my own from my pre-option trading days. I watched my money get flushed down the toilet with the stock price.

I remember when Enron stock plummeted. I watched people frantically ride it all the way to the bottom. Phrases such as, "it just has to go back up", were all too common.

When you're losing money, you often lose your mind also.

Somehow you convince yourself that a stock just can’t fall any lower. We all know that's not true.

In my experience, I've never seen a Married Put investor concerned about a catastrophic drop in stock price, at least up until the Put's expiration date. If the price gets too low they will exercise their option and move on to a better stock.

A Married Put is when an investor purchases a Put option and at the same time> purchases an equivalent number of shares of the underlying stock.

Establishing a Married Put position is what the investment community would consider as hedging your investmentA Put option will provide you with insurance against a stock market lossPurchase a number of Put contracts equivalent to the number of shares held

If you're ready to learn the next strategy proceed to Lesson 3: "Buying a Protective Put".

You can proceed to Module 4: Stock Charts whenever you feel you are ready.

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