Leverage Your Investments with Options
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If you want to jump start your investments, you will need to learn the basics of option trading. Take a careful look at the choices you have while investing with options; the two basic option vehicles are "calls" and "puts". When you think that the market will go down in a short period of time, then you should consider "puts". You should buy "calls" when you think the index or stock is going up quickly. When the stock is dropping, then you should buy "puts". If you think it is going to go higher in value, then buying "calls" will give you the advantage. In order to determine the index or stock's direction, you'll need to study the price chart of the actual index or stock. The MACD is a great indicator. If you are not familiar with it, then you should study it. You will learn that by using MACD divergences that it is a great way to forecast the market. When purchasing these short lived and limited investment funds we call options, it will give the investor an advantage. There is a lot of advantage as well as less risk. By closely watching the stocks you want to buy you will learn which to invest in and which to stay away from when the market is moving up and down. How do you earn money with options? This is a very important question! For instance, if you think Google will go up over the next 10 months, then you can buy a "call" option contract to lock in a lower price. With this contract you will be allowed to buy Google at the strike price even though the price goes up over the next 10 months. If you have a strong feeling about the movement of the stock market, weather it is going to go up or down, then you can buy options. With trading options you can earn more money than by trading the traditional ways with stocks. Most of the options expire before 2 years. Ones that last a long time are called "Leaps". Leverage can work for the "put" options also, and it also gives an advantage over selling stock short. By using "puts", the risk is limited, but if you sell a stock short, the risk is unlimited. All option contracts have an expiration date and there is the direct transaction between sellers and buyers when options are sold over the counter.