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“Don’t limit investing to the financial world. Invest something of yourself, and you will be richly rewarded.’ – Charles R. Schwab
Recently I have started dividend investing. Making small investments from my pay check. I have learned that if an individual does not want to work a 9 to 5 forever then that individual must set things in motion. In addition to this I purchase courses from Gumroad to study and learn high income skills. Despite student loan debt the internet allows us to reshape our lives with accessing knowledge. Applied knowledge can generate income. I purchased three courses about stock options. The first course is entitled Intro to Options by Chris Johnson. The second course is entitled Stock Market Combo-Stocks and Options by Todd Captial, and Advanced Options Course by Todd Capital. It is my belief each courses does an amazing job of teaching stock options. If you are interested in trading stock options I highly recommend that you purchases these courses. Here is what I learned from these courses. So these are the notes I took from course essentially the gist. It is my belief that one should still do additional research and take this serious. Stock options can be fun, rewarding, and risky. Anything involving money is risky and should be take seriously.
What are stock options? A contract that allows the buyer the right to buy or sell stock at a certain price. The stock is usually sold on or buy a specific date. The specified date is usually the expiration date. So initially if you are right you can win the bet and be able to purchase 100 shares at a specified price.
How to Understand Stock Option Price Breakdown?
Contract prices hold a multiplier of 100.
Clear example 3.81×100= Means you pay $381
The formula is once you buy the contract, you can sell it at any time, on or before the expiration date. If and when the stock’s price hits the price that you bet it would be, you can buy 100 shares of the stock at that price, at that time.
What is the difference between a put and a call option?
Put option- A put option is known as a bet that the stock price will go down to a specified price, on or before expiration date. This gives you the right to sell 100 shares if you have shares.
Call option- A call option is known a bet that stock price will go into a specified price, on or before the expiration date. This gives you the right to buy 100 shares if you have money.
Investors generally purchase stock options as a form of insurance, to protect a long-term investment that the investor has in the market. The notion here is that the stock price is going down. When you buy an option betting the price will go up or down, and it does profit you money. Another way investors use options for insurance is making sure that the obligation is fulfilled. Said differently, if your price drops and you decide to sell your shares at the specified price, then that person sold you the option is required to buy shares that price.
Difference Between The Strike and Break Even Price Price
Strike Price-The number that you bet the stock’s price would be by an expiration date.
Break Even Price-The number that stock price must reach, in order for the option buyer to avoid loss if they exercise the option.
If you want to learn more about Stock Options I suggest that you purchase the courses I mentioned above. In addition to that check out some videos on You Tube. Another great source is Investopedia. Most importantly learn how to read a stock chart. Join an options trading group/community on social media. This is can be used as a networking tool. I currently use WeBull and TD Ameritrade for dividend investing as well as Robinhood. However, I plan on leaving Robinhood. I will post links about how to buy and sell stock options on both TD Ameritrade and We Bull.
Wealth Always Reigns Supreme