Daily Gains Letter

Options

At the very core, an option is a contract between two parties. It gives buyer a right, but not an obligation to buy, or seller a right to sell, but not an obligation to sell a financial instrument at a certain price and time.

Options can be used by investors to hedge their bets, create more income or both. With that said, options have limited life, and if investor doesn’t act accordingly, he or she can lose the entire investment.


Three Basic Rules for Easier Options Trading



Easier Options TradingTrading options isn’t easy. It is important that investors understand them clearly; if they don’t, they could lose their entire investment, be faced with heavy losses, or end up with a position they never really wanted in the first place if the trade doesn’t work in their favor. Knowing what kind of options to buy is just the first step. There are many other factors investors have to consider before entering the trade, including the following three considerations: Keep the Bid and Ask Spread Small When it comes to stocks, thanks to liquidity in the stock market, the bid and ask spread—the ... Read More



High Risk, High Return: One Simple Way to Profit as Stock Prices Plummet



High Risk, High ReturnIt’s not uncommon for a company to get in trouble and suffer for many quarters, or even years, before there are some improvements. As a result, when a company’s conditions deteriorate, the stock prices follow in the same direction—they decline. There are many examples of companies that got into a downward spiral and their stock prices plummeted over time—consider companies like Blackberry (NASDAQ/BBRY), formerly Research in Motion Limited, losing its market share to competitors, and Bank of America Corporation (NYSE/BAC) being heavil ... Read More