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Fellow Investors & Traders,
Finding the right buying opportunity for stock options is the key to
making consistent investment profits in the stock market.
If you’re just starting out trying
to find your first buying opportunity, you don’t have to spend a lot
of money, actually you can start with about $150.00! Of course, more
would be better – but if you are on a limited investment budget –
getting started with your first stock option buy on $150 is just
fine! Starting with $500 will
give you more buying power!
Step 1. You need to have your brokerage
account open and funded with some investment money (Start with as
little as $150). I’ve recommended “OptionsXpress.com” for the
best brokerage firm – I think they have the most functions and
features for individual investors with the best cost for stock option
investments. I also have accounts with them and have had excellent
support all the time!
One of the great features that I use every week
is the "Virtual Trade
Platform" on OptionsXpress.com. You can use this
Virtual Trading Platform to simulate the actual buy/sell transactions
that you would use if you were trading with real money. It's easy to
understand, and most of all it will give you some really good
practice in trying out different strategies for planning what you
want to buy (stock shares or stock options). Click
Here! to see the screen!
Click
Here! to see one of
my Virtual Trading Accounts and what I’ve bought over the past
months.
Now,,,,Here's what
you do:
A.
Fill out the OptionsXpress.com online application to get your account
open. (You don't have to fund it yet
-- you can do that whenever you get ready – you don’t need to
send any money at this point --
you just want to get everything setup so you can start using
the Virtual Trading Platform
to start practicing).
B.
Once you have your username and password setup, you can get start
using the Virtual Trading Platform to start planning for good buying
opportunities.
C.
Get a copy of my stock price calculation software program to help
simplify all of your investment pricing calculations and help you
better organize your planning strategies.
Step 2. Now you’re ready to look for
buying opportunities. Here’s
where you need to start doing your research (“Due Diligence”) to find
the investment companies that have stock options to offer on the open
market. Not all companies
offer “stock options”. You can find out easily by going to Yahoo.com (Click on “Finance”) and
enter the stock symbol (Ex. AAPL).
On the left side of the screen (under “Summary”) there is a link named “Options”.
If you click on that link you will see the available stock options –
if the link is “grayed out”,,,the company does not offer stock
options at the current time.
Click
Here! to see my
current list of stock option investment companies that I follow. This is a good list to start from
(and what I use every month) – these are Top Quality companies that
offer available stock options every month – and the most important
factor is that they are “price movers”. They consistently move higher in share price ahead of
the earnings date which makes
the stock option prices increase in value also.
Step 3. How do you find these
low-cost stock options?
The key to finding low cost stock options from top quality is “Planning”!
Once you define which companies you plan to invest in (make your list
of 1 - 6 Companies), the next activity
is finding out when the company is due to report their earnings and
write that date down on your list next to the stock symbol.
Here’s one for you add as a “Top
Buy”! Apple Inc. (AAPL)
-- One of the Top Quality Technology companies with great product
lines, consistently good earnings, and high volume activity on their
stock options. Major investors quietly buy and sell large volumes of
Apple Stock and Options every week – and it’s one of my top buys
every month. Follow the
price movement and activity on Apple Inc. over the next 6 months – this will give you good
experience and first-hand exposure to following a Top Quality company
investment.
Now, remember I mentioned the link
named “Options” from the Yahoo.com “Finance” section. There
is where you will find the actual current prices of the available
stock options. From that
screen you can see the current month available stock option prices
and also future months available stock options prices. Just click on the different months
to see the information. Now
you need to choose which stock options (current month or future
months) to look into for potential buying opportunities. In most cases the price premiums
will be higher (will cost you more to buy them) for the future months stock options,
but will give you a longer timeframe before the stock options expire.
The current month stock options are generally cheaper, so you have to
decide which ones you would want to buy.
I generally try to find stock
options in the price range of .35 cents to $1.75 that I think has the
potential to increase significantly in value over the next few days
or weeks. Also, depending
on if I’m researching some of the more volatile companies (like AAPL,
BIDU, FSLR, GOOG, MON, PCLN, POT, RIMM, or X ), I might
consider paying for a higher priced stock option (Over the $2.00
range), because there will generally be much more price movement
with these type of companies.
Next, you have to plan your buying
opportunities timeframe around some type of upcoming “planned
event”, like earnings announcements timeframe or some type of
special event the company plans to participate in such as Business
Conferences or Tech Conferences.
The probability of “Price movement” ahead of these type of events
greatly increases your chance of making a significant profit if you
buy into a low-cost position ahead of these type events. That’s where
you have the best chance of making money consistently with relatively
low investment cost.
Whether you want to buy “Call
Options” (planning for the share price to move higher), or “Put
Options” (planning for the share price to move lower) you must “plan
ahead” and try to anticipate where the stock price will be in the
next few days, weeks or month. This is where you can make significant
gains buying low-cost stock options and waiting for the market to
move in your favor ahead of the earnings news. Also, take into considerations what’s currently going on in
the with the economy. If the overall stock market is trending lower,
you may need to wait a day or so to see if the price continues to go
lower before you buy – and you’ll get a better price – but at least
have a price in mind that you are comfortable paying! When the market
starts to move higher, you will be ready!
Here is the best way to capitalize
on both a “Call” and “Put” option scenario at the same time:
In order to ensure a high
probability that you will make a profit from every Stock Option
position, you need to plan to buy at least “1” low-cost CALL option
(if you are planning for a upward price movement in the company
stock, and most importantly plan to buy at least “1” low-cost PUT
option to protect against your downside if your CALL Option position
starts losing its value once you have purchased it (especially if you
plan to hold your stock option position going into the earnings
announcement news).
The new rule is to “Never, Never,
Never” hold a “Call Option” position without having a “Put Option”
position at the same time when you buy into a stock option position
just ahead of a major planned company event (such as earnings
announcements). Just after
the major event is over, the stock price will either gap up higher or
gap down lower. If you have
low-cost positions on either side, then you position yourself to have
a 90% chance of taking a profit when closing both of the
position. Using this
‘Two-Sided” approach works best on high volatile stocks that have a
track record of big price swings (such as AAPL, APA, BIDU, CME, FCX, FSLR, GOOG, GS,
IBM, ISRG, MA, MON, MOS, NKE, PCLN, RIMM, WYNN, X). These are all Top Quality
Companies that consistently have big price swings during every
quarter, especially around the earnings timeframe. If you don’t follow this one
rule, most of the time you will lose money as the market could go the
opposite way against your position, so make a habit of following this
rule every time!
Here’s a great example of how this
strategy worked on positions for AZO (AutoZone Inc.) before and after
the 2007 December 1st quarter earnings (12/04/07)! Click
Here!
The other strategy that works in
this situation is when you have multiple accounts. To simplify your
strategy you could buy the “Call Options” in one account and buy the
“Put Options” in the other account.
After the event or news is out and the stock price starts to
move (in whichever direction), chances are your low cost stock
options will produce some good overall profits in one of the two
accounts depending on how much price movement occurs within a few
days.
After a few months of using this
particular buying strategy you can move some funds around between
accounts to once again even things out and continue the same strategy
on other opportunities that you find.
Here’s another consideration: After the
major event is over, usually the stock price start to trade down (no
more demand) or if there was any negative news during the event – this is a good opportunity to
take a “Put Option” position in anticipation that the price will
continue to move lower. Just
about every week these type of events occur, so look for these
opportunities also when you are considering what positions to buy
(and when to buy them).
This is exactly what happened
right after the Apple Inc. Developers Tech Conference (Jun 10th
2008). After announcing the anticipated new 3G IPhone model at the
end of the conference, the share price started to drop the following
day – the event was over!
The Jun 2008 “Put Options” all started to trade higher over
the next 3 days as the stock price fell over $7.00. A few days later
one of the analyst upgraded the price target and the stock shares
once again started to trade higher.
So,,,look for these type of situations – they will happen
again in the future, you just have to be aware and looking for them
in order to take advantage of the price movements.
You have to look for these type of
opportunities and using my weekly newsletter information can help you
get started with your Due Diligence and Research on some of the best
companies that report good quarterly earnings. That’s how I find them every
month!
“Planning, “Research” (researching your
information to find good opportunities) and “Timing” are
the keys to making a good decision to buy stock options (and which
stock options to buy). Once
you have everything setup, looking for good stock option
opportunities will be the main activity to concentrate on.
I have posted a section on my
website with examples of some previous low-cost stock options in top
quality companies ahead of earnings.
Click
Here! to see real
examples of some low-cost stock options that turned into nice profits
gains. That’s why
I look to buy the “Stock Options” instead of the actual shares. These same
examples will occur again over the next earnings time frames for
these companies – that’s when you will have another opportunity to
plan ahead and look for “low-cost” stock options ahead of earnings or
any special upcoming events.
Now that you’ve seen these examples
of how to find low cost stock options – the one thing you will need
is a easy way to calculate these type of costs and projected profits.
You need to have a good, simple,
easy to use stock price calculation program that quickly performs all
of your potential price calculation scenarios so you will see first
hand what your projected costs, percentages, gains or potential loss
would be before you place your buy transactions. My Stock Calculation Program is an
excellent tool to handle all of your stock price calculations quickly
and easily.
You can take the 7-day FREE Trial
(with no cost) to play with the calculation tools, then order your
full version copy to have for a complete program of tools for all
your future buy opportunities. Click here! To see all of
the Software Program Advantages!
If you have not taken the 7-Day
Free Trial! Download your free copy today -- play around
with some calculations and see how much simpler the program makes all
of your cost, profit and exit planning calculations.
See the 7-Day Free Trial link on the
homepage!
www.newstocksoftware.com
If you have any
questions or need some “one-on-one” guidance to help with your
research and planning, let me know – I’ll respond as quickly as I
can!!!!
To your
success!
Jimmie V. Smith
markettrading@juno.com
Copyright 2007
Market Trading Technologies
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