Best Day Trading Software

Posts Tagged ‘recessions’

The 2008 recession and stock market crash is the worst financial and economic crisis since the great depression. By Feb 2009, the Dow has dropped almost 50%, erasing all its gains since 1998. In terms of absolute points, the Dow has dropped over 7000 points, which is more than the entire Dow index before 1998. Without doubt, this stock market crash has rendered many traders and investors helpless in search for profit.

Even though profiting during such market condition is a really tough thing to do, traders and investors still bought stocks in hope of a recovery only to be disappointed again and again leaving a bunch of stocks in deep losses in their account. When money is used this way, what it really does is to rob investors and traders of cash for investing when the real recovery starts.

Discover The Day Trading Robot

So, is there a way to place those bets with very little money and limit your losses to negligible amounts if your bet is wrong as it had been so many times in this stock market crash so far? Yes, the answer can be found in stock options trading.

Everyone knows that stock options trading is risky and that you could potentially lose all your money. What everyone failed to recognize is the fact that stock options trading is also a risk limited way of trading for big profits while controlling potential losses to negligible amounts!

Stock options investing are contracts that allow you to buy a stock at a specific price no matter how high the price of that stock is in the future (Call Options) or sell the stock at a specific price no matter how low the price of the stock is in the future (Put Options).

By replacing the buying of the stock with buying its call options, you will be able to control the profits on a stock using just a small amount of money. If the stock goes up, you simply sell the call options for the same profit as you would as if you bought the stocks. If the stock goes down, you lose nothing more than the small amount of money you paid for the call option contract. See where I am going with this? If you had bought only the call options of those stocks that you have bought all of last year, you would have lost only a small fraction of the losses that you would already have incurred through buying the stocks.

Let’s look at an example.

John and Peter have $15000 to invest with each and they both decided to buy shares of Apple Inc, AAPL, after it has dropped to $141 in October 2008, expecting a rebound. Peter decided to buy 100 shares with $14,100 and John decided to play it conservative and bought 1 contract of AAPL’s call options with strike price of $140 which was asking at $10.20 for a total price of $1020. 1 contract of call options allows you to control the profit of 100 shares of the underlying stock. In this case, John totally replaced the buying of 100 shares of AAPL with buying 1 contract of its call options. 2 weeks later, AAPL fell all the way to $85 as the recession deepened. Peter lost over $5600 while John lost only the $1020 that he spent buying the call options.

Assuming both Peter and John were right about AAPL and the stock rallies to $200. Peter would have made $5900 in profit while John would have made the same $5900 less the amount of $1020 that he paid for the call options.

See how buying stock options rather than the stock itself in this volatile condition allow you to make a few bets for a rebound without risking all your money? In the above example, Peter would only be able to make one bet once on AAPL with $15,000 while John would have been able to make those same bets more than 10 times at strategic support levels. Who would have a better chance of winning?

By replacing the purchase of stocks with controlling the same number of shares of that stock through its call options, you would definitely have a better chance of survival in this recessionary market condition. Be warned however, that you fully expect to lose the entire amount of money paid on the call options should the stock continue to go down, which is why you NEVER use all your money in a single trade.

Go Here To Discover The Day Trading Robot Now!

By: Master J - Founder, MastersoEquity.com

Article Directory: http://www.articledashboard.com

From The Blogosphere:

Basics Of Stock Market Investing

If you would like to have your stock order be entered right away with just a few clicks on the computer mouse [...]

Investment Tips during A Recession

Financial gurus will actually make money during a recession. In fact, the current economic situations should have no significant impact on your personal finances as long as you think smart and plan ahead of every investing decision you make. Even if you usually tolerate medium- or high-risk investments, a recession is the time to scale back. While you do want to continue making money from investing, high-risk behavior is going to be your worst enemy.

Crash To The Past

No, the title is not about another stock market crash - it’s about crashes in the past. This one is a one-pager about the Nikkei Index collapse that began in the early 1990s. I remember being in college at that time, and the Japanese [...]

Economic Collapse

I am also aware that at any time a stock market crash may happen and that it is time to be ready for it. The VIX index which tracks fear is very low and this is an indication that a crash will not happen soon however.

Jason Ng is the Founder and Chief Option Strategist of Masters ‘O’ Equity Asset Management ( MastersoEquity.com ) and author of an Options Trading education site, Optiontradingpedia.com. He is a fund manager specializing in options trading and his revolutionary Star Trading System has helped thousands.

Technorati Tags: Amount Of Money, Bet, Bets, Call Options, crash, day trading, Dow Index, Economic Crisis, Great Depression, how to, How To Make Money, Investing In Stocks, investment, Losses, make money, Money Investing, Negligible Amounts, Profits, Recession, recessions, robot, Sma, stock, Stock Investing, Stock Market Crash, Stock Options Trading

• Is it true that currency trading creates a new millionaire everyday? I have learned and I'm currently learning more and more about currency speculatrion, and I've set up a practice account. I know that the foreign exchange markets (Forex), creates more money in profits everyday than the entire stock market in 1 year which is a collosal daily intake of .8......
• Canadian Day Trading, Need help, thanks :)? Ok, I have now learned how to successfuly day trade and now I want to know how I go about doing it. I live in Canada and I want to know the following. Where can i trade with trades at around -8 a trade? If i buy a stock at......
• Online trading, can I just buy some stocks and that's it or I have to be active and trade a lot or buy somethi ng, becasue I have some money but I don't have enough to buy like all the time. And I'm novice as far as constantly trading all the time (doesn't it cost money to trade anyway each time? so if a stock goes up a dollar then you wanna sell, you're......
• what do say about day trading or intraday in share market is it a wise decision? do you prefer investment strategy...4r short term and long term. else tell me wats your take on share market?? just few days back my friend bought essar oil 1000, ptc 1000, Rnrl 1000, gmr 600 recently for intraday. price gone down so he tought to hold and sell tomo but......
• How to buy stocks for dummies etc? What is the least amount of money that you can invest in? I would like to learn the basics of buying stocks or learning how to buy stocks that would give me a good return on my investment. The issue is I would like to know if there is any solid advice one should know before investing in as well. More or......
• Which online broker is best for Super Sub Penny stocks? I know some of the brokers charge an additional amount per # of shares over 1000. If I'm investing in super sub penny stocks (.0001) then I'll be buying and selling hundreds of thousands to multi millions of shares, if I were to use Sharebuilder, it would cost me a......
• Wheres the best place for me to trade stocks in my situation? I currently use sharebuilder... But this doesn't really give me the ability to pretend im a day-trader. Its great for monthly investing, but i'd love to be able to up and buy 500 shares of a pennystock to resell shortly thereafter. Sharebuilder doesnt do this for me. problem is, most......

• How To Trade Options hopfeed_template=""; hopfeed_align='LEFT'; hopfeed_type='IFRAME'; hopfeed_affiliate_tid='cbtc'; hopfeed_affiliate='satoriman'; hopfeed_fill_slots='true'; hopfeed_height=150; hopfeed_width=400; hopfeed_cellpadding=5; hopfeed_rows=3; hopfeed_cols=1; hopfeed_font='Verdana, Arial, Helvetica, Sans Serif'; hopfeed_font_size='9pt'; hopfeed_font_color='#000000'; hopfeed_border_color='#FFFFFF'; hopfeed_link_font_color='#3300FF'; hopfeed_link_font_hover_color='#3300FF'; hopfeed_background_color='#FFFFFF'; hopfeed_keywords='forex robots, trading robots '; hopfeed_path='http://satoriman.hopfeed.com'; hopfeed_link_target='_blank'; There is a lot of hype surrounding options trading, and for good reason, it's a good way make a lot......
• Affiliate Marketing Basics Affiliate Marketing Basics. One of the most frequently overlooked income generators for any website is offering additional products or services that compliment your own personal line of products or services.There are numerous companies that will pay a website owner a commission for each sale it brings in, and our......
• Forex Megadroid Forex is an international market with the central Forex Trading located in London and olther centers situated worldwide. Moreover, due to the innovative technologies traders do not have to be located phisically at those centers, they can earn profit online from the comfort of their homers and offices. Thus, every......
• Six Lessons James Bond’s Casino Royale Can Teach Us About Money I always tell myself that if cable wasn’t free for me, I wouldn’t have it. But then I would miss out on the James Bond movie marathons that run 2-3 times a year. A month or so ago a network ran a marathon like this and I saw Casino Royale......
• Manipulation In the Financial Markets In July and August, the USD has actually become stronger against most other currencies, on apparently no news. Gold had also dropped as low as $790/oz from a high of $1030/oz this year, even though there is a shortage of physical gold in the US and the US mint had......
• Sunday Money Madness: Ghosts, Spirits, Haunts, and Souls Lots of holidays and celebrations this weekend. Halloween on the 3st. All Saints Day on the first of November. All Souls Day on the second. Dia de los Muertos covering the whole weekend for many, also known as the Day of the Dead which was yesterday specifically. Samhain for the......
• Are Stocks A Better Investment Than Real Estate? According to this article in Money Magazine, stocks are a better investment, based on a study taking in account the years 1978 to 2004.While there are some valid points favoring stocks over real estate, I think it was a one sided arguement.Why choose a period where the stock market did......