Understanding the Linux File System

[sagasan42]

A stock is a trading instrument, but so is a stock option. Using a stock option dramatically lowers your costs. For example a stock is trading at $73.63 and you think it is a good entry after a correction. However you have only $4000 in your trading account so you can't afford to buy even 100 shares because you would need $7363 to put on the trade. Instead you can buy a call Cash Crew Review option "at the money" contract for only $1.43 per share for a total investment on 100 share contract of $143. This means you can trade the stock because the option contract is within your budget, and your risk is now only $143 rather than $3000 based on proper stop loss and buy entry prices. If you have plenty of capital to trade the stock, but when you study the actual entry price based on a professional bracketed order that protects from whipsaws and stocks that reverse suddenly, you find that the proper stop loss placement is far too much risk.

You do not want to take this much risk but you really like the stock and are confident it is going to recover, and move back up based on strong indicators and strengthening fundamentals. To insure that the stock is going to continue to move up, that you are buying into strength and are therefore avoiding the risk of a whipsaw the entry must be at $75.50 and the stop must be at $71.00. That is a 4.50 point risk or $4500 on your intended 1000 share purchase of this stock. Rather than buying the stock for $75.50 x 1000 = $75,500 which ties up a lot of capital that you have to trade and is a high risk trade, you could use an option to leverage into the stock using an option you intend to exercise. This means that for $1430 for 100 contracts, you have lowered your risk for this trade by $3070. This is a huge difference in the risk of buying this stock.

Exercising a stock option is as easy as buying a stock. When the stock moves up to your intended entry all you do is place an exercise order for your stock option, and immediately your broker will execute your option contract, pay for it out of your broker account and now you own this stock. Your initial investment was low, and your risk was lower than if you had bought the stock outright. When you use the stock chart to determine your entry, your stop loss, the risk of the trade, the potential profit of the trade, and the proper option chain it makes trading options simple, accurate, more profitable, and far less work than the out of date options strategies. You do not need options indicators, you do not worry about implied volatility, or delta neutral. You don't need to learn complicated, convoluted options strategies because The Option Premium Always Follows the Stock.

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