Profiting from Options
Thursday, October 1, 2009 | UNCOMMON COMMON SENSE Is this Spam?In your lead article of 10/01/09 You give an excellent desertation of what In The Money, At the Money and Out of the money means and how they can be used But the most important question, "if I am right on the stock how can I be sure to make money/"
If it is true that 90% of all options expire worthless then the answer then becomes obvious. SELL OPTIONS and let them expire. Properly structure one should be able to double his money (invested) every month or two if he picks the right stock. But to make it even better one does not have to pick a stock that goes up. one can still make his money if the stock ends up unchanged and that can be done by using either Puts or Calls. The best way to explain is to give an example;
Lets take an active stock selling at $81 that you have confidence will go up. By How Much? Not Important.
BULL SPREAD
You can easily buy a 1 month or longer $75 in the money Call and Simultaneously Sell an $80 in the money Call for anywhere between a $2 or $3 debt spread. If the stock ends up at expiration day at $80 or higher you make either $2 or $3 depending what you paid for your Bull Spread You can make your profit even if the Stock dropped $1 to $80.
PUT Credit SPREAD
The exact same thing can be done using Puts instead of Calls only this time yu get the profit up front. Using the same stock as an example;
You buy the $80 Put and Sell the $75 Put again for either a $2 or $3 credit If the stock ends up at $80 or above you get to keep the money. In ither case the maximum risk and amount of money you have to put up as collateral is the $2 or $3. So as long as the stock stays above $80 in either case you have either put up $3 to make $2 or you put up $2 to make $3 And the stock does not even have to go up. Thats a lot easier than picking winners.
There is more a lot more but that should be enough to entice you to begin your research.
UNCOMMON COMMON SENSE
Dr.Aubie Baltin
uncommon@aubiebaltin.com
561-840-9767
