Employee Stock Options
The best and simplest way to profit from any traded market is if your company has a stock option plan at your place of employment. These plans offer an additional perk for employees and with this plan employees can buy company stock, which represent a share of ownership of the company. Usually, the company will offer these stocks at a discounted price, and some companies offer a 2 to 1 sales sharing arrangement. You purchase one share, and the company throws in another share to sweeten the deal. This is the safest, the best investing possible and your stock position and profit is bound to grow. It is like getting a dollars worth of “something” for fifty cents. In this case that “something” is money.
Commodity Markets and Options
The markets with the longest histories have to do with commodities. A commodity is any useful raw material or primary agricultural product that can be bought and sold. Today in America all agricultural markets are traded through the Chicago Mercantile Exchange. The market sets the price for each commodity based on the laws of supply and demand.
The rice market in the Far East has been open for trading for more than 500 years.
The use of the option system in these markets is a way for investors to profit from fluctuations in the future price of the items produced (commodities). If a speculator feels that a particular commodity will increase in value over a set time frame he places a “call” which in effect guarantees his price for the future. On the other hand, if he feels the price is over inflated or just too high and will decrease over time he places a “put.” While it is complicated, it serves a purpose for producers, investors, and retailers.
Options and Market Fluctuations
Investors make a stock purchase based on fundamentals about the company itself or by technical analysis. Technical analysts look at the movement of the price of the stock over a period of hours or years and make a decision to buy or not buy based on complicated theories about technical analysis. Charles Dow of Dow Jones fame had an effective but complicated system for analyzing stock price fluctuation. Other technical analysis tools include Price Action, Volume Analysis, Fibonacci, Elliott Wave, and a new favorite, Ichimoku Kinko Hyo.
Forex and Options
The foreign exchange market (Forex) has created a great deal of interest for traders in recent years. Like options trading, you can buy (call) a position or sell (put) a position. In Forex one currency, the base, is valued against the quote or the counter currency. For example, the British Sterling Pound is traded against the American Dollar, called the Cable by traders. It was this market where George Soros made $1 billion in a single trade in 1992. Futures and options are the newest trading opportunities that deal with price fluctuations over minutes or up to one week of duration. A trader takes a position planning on the stock or commodity increasing over time, known as a “call” or if the trader feels that the position will go down, he places a “put” on the position. There is a great deal of “hedging” going on in these transactions with investors buying and selling positions to prevent losses. Both technical analysts and those following fundamental analysis have flocked to trade these exciting opportunity.
Investors are those who take long-term positions in a stock market, stock markets and indexes has been proven by history to increase in value over time. Traders, on the other hand, represent those who live for the excitement of making money in the short-term. Options trading represents an exciting way to profit over the short term. These traders must spend countless hours reading charts and analyzing their positions. It is a very pro-active way to trade the markets, but for some, it represents a way to profit and enjoy the experience at the same time. Analyze your individual investing interests and determine how risk adverse you are. For more information about trading options refer to TorOption and its review.