Skip to content

8 ways the average investor can make money in this wild stock market

According to the rule of 72, you divide your expected annual rate of return into 72 , and that tells you how many years it will take to double your money. The second thing you must remember is that a "call option" gives you the right to buy a stock at a certain price by a certain date; and a "put option" gives you the right to sell a stock at a certain price by a certain date. True, a good broker can perform a valuable service. What is a Put? As it moves closer and closer to maturity, its value slowly climbs until the bondholder is eventually repaid the face amount. Days later, CEO Tim Cook assured investors that the impact from the troubled Chinese economy would be minimal, and the share price shot back up. Both of these methods allow investors to essentially borrow money from a brokerage house to buy or sell more shares than they actually have, which in turn can raise their potential profits substantially.

Watch video · How a trader made 1,% of their money in minutes. Amanda Diaz Apple just had its best month in a decade and here's how to buy it for less Trade options, stocks, futures + forex on.

Event Registration

This means that you can exercise them at any time prior to the expiration date. In contrast, European style call options only allow you to exercise the call option on the expiration date! Call and Put Option Trading Tip: Finally, note from the graph below that the main advantage that call options have over put options is that the profit potential is unlimited!

So the most that a put option can ever be in the money is the value of the strike price. Of course, you don't have to sell it immediately-if you want to own the shares of YHOO then you don't have to sell them. Still not too shabby, eh? That's where your call option comes in handy since you do not have the obligation to buy these shares at that price - you simply do nothing, and let the option expire worthless. Important Tip - Notice that you no matter how far the price of the stock falls, you can never lose more than the cost of your initial investment.

That is why the line in the call option payoff diagram above is flat if the closing price is at or below the strike price. Also note that call options that are set to expire in 1 year or more in the future are called LEAPs and can be a more cost effective way to investing in your favorite stocks. Always remember that in order for you to buy this YHOO October 40 call option, there has to be someone that is willing to sell you that call option.

People buy stocks and call options believing their market price will increase, while sellers believe just as strongly that the price will decline. One of you will be right and the other will be wrong. You can be either a buyer or seller of call options. We will return to this topic in a bit. These are just a few of the reasons to to stay away from penny stocks. When the market is up significantly, you should be able to match those gains simply by buying an index fund.

So why does the average investor do so poorly? Or, are you investing based on tips you see in the media, read in books or hear about from their neighbor or brother in law. Another reason you may not be realizing the returns you should is because you've invested with an advisor who charges a fee, or a commissioned broker.

The more you pay these professionals, the less of your money you keep. True, a good broker can perform a valuable service. Unless you can tell the difference, you might be better off learning to manage your own money.

Buying Cryptocurrency or another fad based on emotion, not knowledge, is always a bad idea. Those who bought at the top would have had a gut wrenching roller coaster ride as it quickly lost half its value.

Regardless of where Bitcoin is priced when you read this, there are sound reasons not to jump onto a bubble like this and buy based on emotion rather than a logical study of the markets.

True, Bitcoin and other cryptocurrencies are indeed exciting because they may be shaping up to be the first entirely new asset class to come along in many years. Cryptocurrencies are not backed by governments or hard assets, but by blockchains; incredibly complex databases that record and share transactions. Crypto has real potential for future technologies, including secure transfers of money; and banks and retailers are seriously studying it.

They are however, extremely volatile and risky, and there is a high potential that most of the cryptocurrencies today will be gone five years from now. Those who want to invest in cryptocurrency would be better off learning about the risks and analyzing likely price movement based on supply and demand first. Robo-advisors appear to be an attractive new alternative for beginning investors or those with limited capital.

You choose an investing profile which will combine your acceptable degree of risk and the timeframe for your investing , and a computer algorithm works on your behalf to make the best investments for your needs and adjust them as conditions change in the financial markets.

Fees are much lower than for traditional advisors, and can be waived entirely once your portfolio reaches a certain size. The drawbacks of robo-funds are the same as the benefits, however: And the biggest decision of all — which of the increasing number of robo-funds to invest in — is still up to you.

However, your broker might require you to have additional cash available for margin calls, and if a trade goes south you could lose your entire stake and more. It can be done, but until you learn how to invest in futures contracts the risks probably exceed the potential rewards.

As in futures trading, you can control far more than your actual investment through leverage, but leverage can also magnify your losses. Options Trading allows you to control a stock or other asset and capitalize on its price movement without actually owning it.

How To Make Money Trading Call Options

A Simple Guide To Making Money With Options. Just know that when you purchase options as a means to speculate on future stock price movements, you are limiting your downside risk, yet your. 5) Think a Stock Will Go Up, But You'd Like To Buy It at a Lower Price, Yet Still Make Money Even If You Never Get In? Writing put options is a great way to make money if the market goes up. How to make money trading Call and Put Options. Simple examples of why option trading can be more profitable than trading stocks. call options that are set to expire in 1 year or more in the future are called LEAPs and can be a more cost effective way to investing in your favorite stocks.