Finance Tips Trading

The Fundamentals of Option Trading

Option trading is something you can use to increase your profits when you are trading on the stock market but you will have to know what you are doing if you want to be successful.  Many traders use options to boost their profits.  Options give buyers rights to buy or sell stock at a particular price until a certain date but the buyer is not obliged to buy or sell if he or she does not want to.

The reason a trader would use options is that it gives them a lifeline in case the stock prices rise or fall.  The price a trader gets when he or she buys an option will be set until a specified date.

Advantages of Option Trading

There are a number of advantages to options trading such as lower risk, high leverage and ability to generate higher profits.  The price of an option is a small amount compared to the actual security so there is much less risk.  When a trader buys options, all he or she can lose is the amount they pay.  However, when you actually buy the security you are putting your money at more risk because if the price moves in the wrong direction, you could lose quite a bit.

Different Types of Options

Options are described by their symbol, either a put (sell) or a call (buy), the strike price and the expiration date.  Call options are bullish contracts and give traders the right to buy the securities at a particular price before the expiration date.  Put options are bearish contracts and give traders the right to sell the securities at a particular price before the expiration date.  The strike price is the set price that the trader can buy or sell the security before the expiration date.

The price paid for an option is known as the premium.  The difference in price between the strike price of the option and the actual price of the security is known as intrinsic value.

Buying or Selling Options

In most cases professional traders will sell more options than they buy and they make the most profits this way.  Options give the buyer a chance to make a larger profit with less risk but if they are not exercised before they expire, they will be worthless.  Those selling options do not have to do anything unless the person who has bought the options wants to exercise his or her right to buy.  The seller has to sell the stocks at the specified strike price if the buyer decides he or she wants to buy.  If the stock price falls below the strike price then the seller gets to keep the premium that the options buyer paid.  He can then sell another option for this stock if he wishes.  If the stock price rises above the strike price then it is very likely that the buyer will want to exercise his or her right to buy the stocks.

The biggest drawback of buying options is the fact that you could lose this money if the stock price does not rise before the expiration date.  Unless the stock price moves in the way you are expecting then you will probably lose out on the money you paid for the options.  Option trading is a bit of a gamble but if you do it properly then you can make quite a bit of money from it.

Finance Tips Trading

Day Trading for Dummies

Most day traders have a lot of experience and will have plenty of knowledge about what they are doing. They know how to make a profit by trading in one day and they do it really well. However, there is a lot of controversy surrounding day trading and the amount that can be made in just one day is something that there is a lot of discussion around. With most of us not really understanding the mechanics of day trading (CMC Markets CFD Trading are a good source of info), it is no surprise that there are plenty of people out their taking advantage of this and trying to make a quick buck.

It is important to realise that while it is possible to make quite a bit of money in day trading, it is also possible for scam artists to make a fortune by selling us programs that promise the earth, moon and stars. The best way to make good money from day trading is to learn as much as possible so that you are armed with the knowledge that you will need to be successful. And that is where automated fx trading comes in.

Day Trading for Dummies

If you are hoping to master the art of day trading then this is definitely the right book to buy especially if you are hoping to make some extra cash. Day trading is very exciting but there is a large element of risk involved. The book recommends that you need to have steely nerves, a lot of patience and quite a bit of knowledge before you begin on your day trading adventure. While the book cannot provide you with the patience and nerves that you require, it goes a very long way to providing most of the knowledge that is required.

Day Trading for Dummies – In Conclusion

The best thing about Day Trading for Dummies is that it is well written and easy to understand. The book focuses on educating you about how the system works and identifies some of the more common mistakes that are often made by day traders. By studying the book, you will learn how to avoid making similar mistakes. There are many different areas covered in the book such as teaching you how to set up an office and your accounts, teaching you the importance of researching and connecting with specific trading services, helping you to plan your trades through careful research, providing information on how the specific tax requirements and how you can comply with them and helping you to deal with the stressful nature of trading in one day. There is also plenty of information to help you learn how to make the profit you want and open your first stock trading or forex demo account..

Day Trading for Dummies

While a lot of people will tell you that day trading is not a good way to play the stock market, there is a lot of money to be made because of the risk involved. However, it is important to realise that if you are not careful about how you approach this type of trading, you could very well lose a lot of money too. The art of day trading successfully comes in learning how to maximise profits and minimise losses so this is what you should focus your efforts on. Day Trading for Dummies will help you to do just that.

Read more information about the book:

http://www.dummies.com/personal-finance/investing/day-trading/day-trading-for-dummies-cheat-sheet/