21st Century Academy

Options trading has become a popular investment strategy during the last 30 years. Buying and selling stock options is a little more complicated than buying and selling actual stock; thus, the practice has gotten a reputation as a particularly risky one. The truth is, options trading can be risky if you’re not familiar with the way the stock market works, and with the particular stock that you are trading. If you become a good judge of which stock is likely to go up in price and which isn’t, however, options trading becomes extremely lucrative, ans The 21st Century Academy are a great example of an Options Trading educator.

How Does Options Trading Work?

There are many different ways to trade stock options. Some of them require you to check on the prices of stock many times a day. That’s how professional traders make their living, and it is a thrilling and profitable practice–if it weren’t profitable, there wouldn’t be professional traders.

All options trading involve giving buyers the “option” to buy stock from you at a certain point in the future. Thus, if you own 500 shares of stock in Company X, you can “sell” someone the option to buy those 500 shares from you at some future point, at a set price. This initial fee that you get is known as the premium. It is determined by how much the shares themselves are worth. It consists of some percentage of the total cost of the shares (the higher the percentage, the more favourable the trade).

Succeeding at trades of this kind is all about being able to predict how much the value of a given stock will go up. If the 500 shares of Company X stock don’t increase by the amount of money you’d set out, in the amount of time you’d set out–then you get to keep the shares and the premium. Options trading a little bit like some gambling games (far from all), where people who don’t know how to play think it’s luck, but actually it’s about confidence and skill.

Interested in learning more about options trading and wealth creation? Check out the free book from Jamie McIntyre.

Written by Clint Maher - 21st Century Academy
Complete Wealth Education P/L © 2008