Steps
- The first step to making money on a stock you own is for you to own a stock. Decide which stock you would like to buy. After you do that than move down to step 2.
- Now that you own a stock I want to familiarize you with something called a call option. Calls can be bought or sold just like stock. They give the buyer the right to buy a given stock at a given price before a set time. So, if they bought a $35 December call for $1 they bought the right to buy the stock at or before the 3rd Friday of December. If they don't buy it buy then the option becomes worthless and expires.
- As a stock owner this should interest you. Say your stock is trading at $40 and the $50 call is at $.50. You could sell the $.50 giving the buyer of the call the right to buy your stock at $50 by the next month out. Mean while you get their $.50.
- Lets look at all possible outcomes. Your stock does nothing and you make money. You keep the $.50 and the option expires worthless and you can sell another call. Your stock jumps up to $55 a 37.5% move in 1 month you have to sell at $50 and you only make $10+$.50 or $10.50 a 26.25% gain. Or the stock moves down the call expires worthless. The $.50 you made helps to negate the loss and you can sell another call.
- The cool thing about this is that you can sell a call every month. This is called a covered call strategy. It will normally pay more than dividends will and the closer you go to the stock's price the more money you can make, for instance if you sold the $45 call you might have been able to get $1.50.
Tips
- For more useful tips and strategies visit this site.
- http://www.stocks-simplified.com
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