Sunday, September 17, 2006

Trading and stuff, not baseball cards

I like options trading. Guess what ya'll? You do not, I repeat, DO NOT have to rely only on dividend paying stocks to make dividend like income in your portfolio anymore! You can purchase shares of high dividend paying companies. It is a great way to increase profits. You really could make an extra 5%, 10% or more over a one year time period. There really are several large companies out there that seem to never pay dividends. Some very loyal and cool shareholders stick with these stocks while the companies sit on billions of dollars in cash. Messed up. They should pay some dividends to compensate the faithful man. Really though, some companies never pay dividends. These people use profits to fund acquisitions, aggressive research programs, or as rainy day reserves. It's amazing how much money people leave on the table. Hundreds of shares of stock, maybe even thousands. It just sits in investors' portfolios and those shares could be putting stacks of cash in their owners' pockets. It's easier now though. Here's how it works... Publicly traded options are offered by most companies. These really cool transactions work with your broker. It's similar to buying and selling stocks. You can collect a premium just by selling the call and you get the premium in cash money and on the day you sell the option. It's just like a dividend. One way is to sell "at-the-money" or "out-of-the-money" calls on your stocks (Covered Calls). This means the strike or expiration price of the option is actually at or above the current stock price. But, you can set the strike price so high the stock doesn't reach that price. Then....you can keep your stock. Heavily-traded stocks like Microsoft (MSFT), Google (GOOG), and Ebay (EBAY) that are held a lot are perfect for this. Option premiums can fluctuate but the examples below show returns you might expect over the period shown for every thousand shares of your stock! Each month, up to 12 times a year, you can sell options, after they expire. It really is not a crazy idea to see return rates of 12% over 60 days. That works out to an astounding 72% annual return just on stocks you already have in your portfolio. Brokerage commissions and taxes will affect your actual returns though. Check PowerOptions, they provide the essential data you need to invest with stock options. I hear it's the best way to Find, Compare, Analyze, and Make Money On Stock Option Trading.

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