Buy Calls to Lock in Opportunity

By www.Options-Trading-Education.com

A beginning investor and trader
may have great ideas but not much
money.

How can someone who
understands the fundamentals and
technical aspects of the market
profit without a lot of cash.

One way to profit from stocks
when you do not have a lot of
cash is to buy calls to lock in
opportunity in the stock
market.


A common bit of wisdom for
beginning investors and
traders is to invest in and
trade that which you know.


For example, folks working in
medicine, pharmacy, and
nursing will have more insight
into new pharmaceuticals
than the average investor.


Mechanics and auto dealers
will have better insight into the
auto industry.


Oil drillers, refinery operator,
and folks working offshore for
big oil will have better insight
into the energy market than
the rest of us.


But, what do you do with lots
of good ideas and very little
cash?


Buy calls to lock in
opportunity as you see it.


How do stock options work?


How do calls work?


Calls are options contracts in
which the buyer pays for the
right to purchase a stock,
commodity future, or currency
at a set price, no matter how
high that price might rise.


He pays his money and is
under no obligation to
purchase the stock in question
and will only do so if the stock
price goes up sufficiently the
make the transaction
profitable.


But, remember, our new
trader in this instance is not
wealthy.

Here is where he buys calls to
lock in opportunity instead of
buying the stock.


First of all the trader will look
for inexpensive calls, calls that
are barely “in the money.”


These are call contracts which
the market in general believes
will not be profitable.


The market prices these
accordingly so they are cheap.


Also remember that our
hypothetical investor and
trader has a great deal of
insight into the stock in
question.


He sees something that the
market in general has
overlooked.


If his appraisal is correct the
market will see the same thing
in the near future.


When that happens, the stock
price will rise significantly and
the value of the options
contract will go up with the
stock price.


The options buyer will have
purchased a contract for
pennies and find that it is
worth dollars.


This also works for a stock
that is likely to go down in
price.


When to buy puts on a stock is
when your expertise tells you
that apparently stable stock is
about to go into a tailspin.


Remember that our
hypothetical investor, trader,
and expert in the stock in
question is not rich.


So, how does he come up with
the money to buy the stock in
question?


He does not have to.


All he needs to do is sell his
call contract.


The call contract will typically
go up in price as much as the
stock rises.


In an ideal situation a stock
rises by twenty or thirty
dollars and so does the value
of a call contract.


If this was a call that our new
investor and trader purchased
for pennies his reward is
substantial.


This is an ideal example of
how to buy calls to lock in
opportunity in trading stocks,
trading gold options, or
trading foreign currencies.


For more insights and useful
information regarding options
and options trading, visit

www.Options-Trading-Education.com.

Buy Calls to Lock in Opportunity

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