Here it is. The most important piece of advice I have for anyone thinking about options trading.
Don't let the red tape hold you back.
A lot of experienced and sophisticated investors shy away from anything that involves paperwork.
They think they're not qualified or ready, or simply that it's not worth the trouble.
Don't be one of them.
Yes, you will have to fill out an options application with your broker, but it's easy.
In fact, you had to file a similar form just to open your trading account in the first place. Now, if you want to upgrade your account to be "options approved," it's just another small step away.
Admittedly, the application may look intimidating at first glance. It is full of disclosures, legal qualifications and the kind of small print that is worrisome.
Yet the purpose of the application is simple enough.
Your broker just wants you to state that you know enough about options to make your own trading decisions.
And not to worry... It's not a quiz.
The disclosures are designed to gauge your level of experience. But their real goal is to let the brokerage firm off the hook in case things go terribly wrong. Of course, that's not going to happen to you.
But if a broker lets anyone trade without at least appearing to check them out first, they could be liable for your losses. And no one wants that.
Because options are by definition speculative, the New York Stock Exchange (NYSE), Financial Industry Regulatory Authority (FINRA), and National Association of Securities Dealers (NASD) all have rules and policies about "suitability."
That's the real reason you have to go through this (very small) hoop.
So you'll fill out the application. They file it away into the "just in case" drawer and you're ready to trade.
What's on the Options Trading Application?
The options application will ask some questions you would expect: Name, address, employment and employer name, annual income and all sources of income. They also want to know your net worth and liquid net worth, marital status and number of dependents.
Then there are a few questions you might not expect.
covered call options
Article Index
Options Trading: The Most Important Piece of Advice for Beginners
To continue reading, please click here...
How to Safely Double Your Dividend Yield With Covered Call Options
As it turns out, despite the summer swoon, income investors were the big winners in 2011.
While the Dow Jones Industrial Average finished the year with a gain of just 5.5%, the 100 highest-yielding stocks tracked by the Dow Jones - as measured by the iShares Dow Jones Select Dividend ETF (NYSE: DVY) - returned a market beating 11.73%.
Of course, the question today is whether or not that performance will carry on in 2012.
However, given the contentious nature of the U.S. presidential race, the ongoing turmoil in the Eurozone and the clouds hanging over the global economy, 2012 is looking like it will provide another great year for dividend investors.
The reason stems from what Martin Hutchinson, editor of the Permanent Wealth Investor, discussed last week in his look at dividend stocks.
"The problem with going for capital growth," Martin points out, "is that you very often don't get it, and then you've got nothing - the investment just sits there."
By contrast, Hutchinson added, "Dividends are easy... All you have to do is figure out which companies have genuinely solid business models that aren't going away."
The technique is known as "writing covered calls," and implementing the strategy is quite simple.
All you do is sell (or write) one out-of-the-money call option - i.e., one with a strike price higher than the stock's current market price - for each 100 shares of the stock you own (the underlying security).
The call is said to be "covered" because you own the underlying shares. As a result, you don't have to put up any added money or "margin" in order to make the trade.
All of the money you receive for selling the calls - the "option premium" - is yours to keep regardless of what happens to the price of the underlying stock.
This "option premium" is then added to your overall gains, boosting the yield you are set to earn from the dividend.
Here's how it works in practice:
To continue reading, please click here...
While the Dow Jones Industrial Average finished the year with a gain of just 5.5%, the 100 highest-yielding stocks tracked by the Dow Jones - as measured by the iShares Dow Jones Select Dividend ETF (NYSE: DVY) - returned a market beating 11.73%.
Of course, the question today is whether or not that performance will carry on in 2012.
However, given the contentious nature of the U.S. presidential race, the ongoing turmoil in the Eurozone and the clouds hanging over the global economy, 2012 is looking like it will provide another great year for dividend investors.
The reason stems from what Martin Hutchinson, editor of the Permanent Wealth Investor, discussed last week in his look at dividend stocks.
"The problem with going for capital growth," Martin points out, "is that you very often don't get it, and then you've got nothing - the investment just sits there."
By contrast, Hutchinson added, "Dividends are easy... All you have to do is figure out which companies have genuinely solid business models that aren't going away."
Options Strategy: Boosting Your Yield With Covered Calls
What's more, if you're willing to put in a little extra time and make use of a proven strategy involving call options, you can safely double, triple, or even quadruple the amount of income you receive from your dividend-paying stocks - even if the share price does absolutely nothing.The technique is known as "writing covered calls," and implementing the strategy is quite simple.
All you do is sell (or write) one out-of-the-money call option - i.e., one with a strike price higher than the stock's current market price - for each 100 shares of the stock you own (the underlying security).
The call is said to be "covered" because you own the underlying shares. As a result, you don't have to put up any added money or "margin" in order to make the trade.
All of the money you receive for selling the calls - the "option premium" - is yours to keep regardless of what happens to the price of the underlying stock.
This "option premium" is then added to your overall gains, boosting the yield you are set to earn from the dividend.
Here's how it works in practice:
To continue reading, please click here...
To continue reading, please click here...