5 Tips For Trading Stock Options

You're ready for the exciting world of stock options, but you need some strategies to check out. Thankfully, the Internet is full of advice from traders. Unfortunately, not all of that advice is sound. Some traders are merely mimicking what they've seen other traders do. 
Others are newbies themselves. Still others are offering advice while secretly trying to sell you their proprietary software. While trading in stock options is an advanced strategy, you don't have to over-complicate things. Find yourself a good broker using a site like BrokerStance. Then, start with some basic strategies. 

The Covered Call

A covered call is a basic options strategy. Also called a "buy-write strategy," you purchase the underlying assets outright. Then, you simultaneously write or sell an option on those same assets. So, for example, if you wanted to buy 1,000 shares of General Electric, you would also write the option on GE. The volume of assets (the number of shares) should be equal to the number of shares controlled by the option. 

So, continuing the example, if you had purchased 1,000 shares of GE, you would also want to make sure the option allowed you to sell 1,000 shares of GE. Investors often use this strategy when they have a short-term position and a neutral view of the stock they're buying. You would use this strategy to generate income from the call premium (from writing the option). You would also use this strategy to protect yourself from a potential decline in the underlying stock's asset value. 

Since investors always make money with this strategy, they're attracted to it. However, it is possible to under perform the underlying stock, making it a less profitable strategy than, say, investing directly in the stock and forgetting the option contract. 

The Married Pull

A married pull is where an investor buys or owns a particular stock, and then simultaneously buys a put option for an equivalent number of shares in that stock. Typically, this strategy is used when you believe the underlying stock will decline in value and you want to protect yourself from short-term losses. It basically creates a sort of insurance policy against losses by establishing a "floor" on losses. 

This is a more conservative strategy and depends on you being bearish on the underlying asset. You are taking a defensive stance in your portfolio. The goal isn't necessarily to make money but to avoid losses. 

A Protective Collar

A protective collar strategy is used when you've already made a lot of money and you want to preserve your gains. To pull this off, you need to purchase out-of-the-money put options on the underlying asset and write an out-of-the-money call option at the same time. The effect? Even if your shares decline in price, the put options protect you and you get to keep the gains you've earned. 

Like the married pull, this is a more defensive strategy. You've already done the hard work of figuring out which stocks to buy, and you've made money. You just want to keep from losing it if the stock turns sour quickly. It buys you some time to get out of the asset if execution is slow (i.e. if the stock is thinly traded) or if you think there's new news about the company that will cause an immediate, short-term, reversal on the price. 

A Long Straddle

The long straddle is used when you want the potential for unlimited gains but want to limit your losses to the cost of the options contracts. To implement this strategy, you must purchase a call and a put option with the same strike price. The option is on the same underlying asset. So, in effect, you are "straddling" both sides of the stock. You have the right to both buy and sell that underlying asset. This strategy works best when you think the underlying asset is volatile and will move, but you're not sure which way it will move. 

A Long Strangle

By adopting a long strangle (as opposed to a long straddle), you are essentially trying to do the same thing as with the straddle, but you're buying the options contracts at different strike prices and you're also buying them out-of-the-money (meaning that they're not immediately profitable when you buy them). 

The call option strike price is typically higher than the put option strike price. Use this strategy when you think the underlying stock will make a huge move, but you're unsure of which way it will move. Like the straddle, losses are limited to the cost of the contracts. The upside potential is unlimited. 

Jarryd Harden enjoys sharing his know how on trading stock options. His articles mainly appear on investment blogs.

Understanding Annuities: Fixed Annuities vs. Variable Annuities

With annuities, it's important to know what you're getting into. This is a huge decision that'll determine how much and how often you get paid during your retirement years. Should you go with a fixed annuity or a variable annuity? Let's take a look at some of the differences between fixed annuities and variable annuities, and you can decide which one sounds more along the lines of what you're looking to do with your money.

What Are They?

First things first, let's define them. A fixed annuity is a contract offered by an insurance company. You deposit money and the insurer agrees to pay a certain interest rate over a specified period of time. A variable annuity is an insurance contract that, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The rest of the income payments can vary depending on the performance of the managed portfolio.

Essentially, variable accounts are similar to mutual funds. You can invest in one or more accounts, and those accounts can own stocks, bonds, or a combination of both. Variable annuities have more fees than mutual funds, though, which leads to them having a higher annual operating expense than mutual funds.

The Tax Differences

One important difference between fixed annuities and variable annuities is the way that they're taxed. With both fixed and variable annuities, any earnings remain untaxed as long as they within their annuity. However, if they're withdrawn, the earnings are taxed like normal income. If you draw before the age of 59, you'll pay a 10 percent penalty.

The earnings in your variable annuity are taxed at ordinary income rates instead of long-term capital gains rates. This essentially converts all long-term capital gains to ordinary income, which is a definite disadvantage for variable annuities because it boosts the share of your gains that go to the government. If you pull your money out within the first seven to 10 years, you'll have to pay an early withdrawal penalty. You may need to calculate different types of annuities to see which one works best for you.

The Safety Difference

A fixed annuity offers more security than a variable annuity, but the upside potential is very limited. With variable annuities, you accept more short-term volatility because the value of your investment will fluctuate with the value of the stock and bond markets. You're essentially looking at risk versus return.

With a variable annuity, if the market goes up, you're golden; if it goes down, you lose money. Fixed annuities are also based on the market, but they don't directly participate in it. The interest is paid out at certain intervals based on how well a specific measure of the market is performing.

Rather than just offering a guarantee, variable annuities provide the opportunity for growth. Your return will depend entirely on how well the investment you select does, and may be greater or less than that of a fixed annuity. If you die before you begin receiving annuity payments, your heirs will receive at least as much as the total of your premium payments.

The Hidden Costs

Fixed annuities don't usually have hidden fees. If they do have a fee, it'll be an annual policy fee, which could run $25 to $50 annually, which can be waived if your investment meets a minimum specified amount. Variable annuities, however, have a ton of hidden fees and charges. They have mortality and expense risk charges, administrative fees, sales and surrender charges, and charges for optional benefits and riders.

It basically comes down to risk tolerance and how much control you want over the investment decisions. Fixed annuities have very little risk, but there's no growth potential. Variable annuities provide a much greater potential for growth, but there's a huge risk involved. Your investment decisions can impact the growth of the annuity. There's a lot of management involved with a variable annuity as well.

For a steady stream of income after retirement, a fixed annuity is the way to go. With little risk and a guaranteed minimum return, you know exactly how much you're getting. Variable returns are much riskier and nothing is really guaranteed; you shouldn't rely on variable annuities as a source of income. Sure, your investment could pay off big time, but you could be left without a retirement fund. If you've got the extra money, a variable annuity might be a fun venture, but otherwise, a fixed annuity seems like a much safer option.

Have an annuity tips from first-hand experience? Leave a comment below.

How A Senior Bachelor(ette) Can Stay Financially Stable

So I have an uncle Charles (not pictured above), the eldest brother of my dad. Unlike his other siblings, he never thought of marrying and settling down. He did have a handful of relationships, each lasted a good number of years, but never did it end up in tying the knot.

Uncle Charles is now retired, and is actively country-hopping around Southeast Asia. He is a man of modest means, and despite his relatively happy-go-lucky, eternally young lifestyle, he hasn’t ended up broke or in deep financial straits.

One time, when the family got together a few months ago, I quizzed him on how he manages to live a financially stable lifestyle without overspending or becoming a miser (he’d be the last person I’d call that). As of the moment, I didn’t have any plans of settling down, and I thought it prudent to receive some advice from a perpetually swinging single with experience.

Of course, he happily shared his wisdom with me, his favorite niece. Now, I’m sharing them with the Internet, because paying it forward and sharing knowledge is the right thing to do.

Always Set Something Aside

Just because you’re collecting your monthly social security checks doesn’t mean you should stop setting something aside for a rainy day. Life has a way of catching people unawares, and it is always a good policy to have some easily accessible liquid assets, just in case.
Bachelor and bachelorette seniors, assuming they have no dependents to take care of, definitely have no excuse in this regard.

Make Money Work For You

There are a lot of ways you can have your money grow. Aside from the emergency savings, do allocate some of your hard-earned savings on investments that are stable and relatively low-risk. If you plan to do some high-risk gambling, make sure it’s with money you can lose.
This piece of advice is pretty universal, regardless of your marital status.

Take Advantage of Senior Citizen Discounts

There is definitely no shame in partaking of any discounts and promos aimed at the more senior members of our society. Don’t let your guard down, however: there are a lot of unscrupulous people and companies that are bent on parting the senior from their savings, so always scrutinize any offer or promotion before jumping in.
Uncle Charles, for instance, takes full advantage of senior citizen cruise discounts.

Protect Your Assets

If by some instance that you do find a romantic connection, and you wish to formalize it with marriage, it’s not unthinkable to protect the money and properties you have earned via a prenuptial agreement.
A lot of people might think this move to be a little anti-romantic or even downright paranoid, but do realize that divorce rates would tell you a very convincing story on why you should do this. This is particularly important for single seniors, as they have a considerable amount of resources earned from their years of work, and to lose a good chunk of their hard-earned money and properties to a divorce settlement would simply be crippling.

Seek further legal advice from family law practitioners and lawyers with similar specializations. Online-enabled firms like Gower & Bluck offer free consultations, so it would be best to seek their initial opinions on such matters.

Keep on swinging, seniors!

About the Author
Stacey Thompson is a professional writer, marketer, entrepreneur, and a lover of weird little animals. She is based in San Diego, California, and maintains a blog with her gal pals, Word Baristas.

Becoming Your Own Boss: It’s Never Too Late

Some people look forward to retirement for most of their working lives and can’t wait to stop the daily grind. However, for others the prospect of giving up a career isn’t so appealing. 

If you’re in this position, you may want to consider launching your own business. After all, there are lots of benefits associated with entrepreneurship. Being the boss of yourself might sound good but is not so easy. 

There is a lot of stress and you might find yourself working too many hours. Since this is your own job, you have to make sure everything works fine. You can start as a professional individual or start a company. That depends on your personal goals and ambitions.

By starting a company, you will become your own boss, meaning you can focus on issues that really interest you. In addition, while starting a firm certainly involves plenty of hard work, it also enables you to function according to your own schedule. 

This extra flexibility can be ideal as you get older. Furthermore, there are the financial plus points to consider. The cost of living is on the rise and many pensioners now find it tough to make ends meet. By starting a small business, you stand to boost your bank balance.

To increase your chances of success, it’s important to bear some fundamental principles in mind. For example, before committing money to projects, it’s vital that you do plenty of research. 

Thanks to the web, it’s now easier than ever to set about getting the information you require. You’ll need to determine the potential market for your goods or services and size up the competition out there. 

Achieving success in the world of enterprise hinges on being able to exploit workable gaps in the market. By spending some time and effort on establishing the facts, you can help to minimise the risks you face.

Meanwhile, you’ll also need to decide what sort of business you want to set up. Becoming a sole trader is the simplest option. 

However, it’s worth bearing in mind that if you register as a limited company instead, your personal assets will be protected if your venture runs into financial problems. Another option is to set up in partnership with other people.

Then there is insurance to think about. If you’re operating from your own property, you may need to change your existing home insurance to reflect this. Also, if you employ at least one member of staff you’ll need employers’ liability insurance. Depending on the nature of your organisation, you may need various other forms of financial protection too.

To help you get your company off the ground, it’s a good idea to seek out local support. Networking will help you build contacts and you can also get some top tips from fellow entrepreneurs. In addition, there may be groups in your area that offer mentoring services to fledgling companies, as well as funding opportunities.

As long as you are methodical when setting up your business, you stand to achieve potentially impressive results.

Living in the South East of England

The South East of England is a highly popular place to live. Companies like Cala Homes regularly sell homes throughout the counties in this part of the world. It’s one of the biggest investment locations in the whole of the UK. There are so many advantages to living here which simply aren’t available living elsewhere. Here are some of the reasons why people want to live in this area.

The Transport Links

The South East of England is an important part of the country economically, especially in shipping. Most of the UK’s trade with Europe comes through ports somewhere in the South East. It’s led to a great deal of investment in the transport infrastructure. It’s the home of the UK’s only high-speed rail system which goes straight up to London.

It’s easy to get to the city of London for business. A lot of workers commute into London from the southeast each day via road and rail.

The presence of the ports makes it easy to get to Europe. Dover is in the South East and is the main sea link to the continent. Countries like Belgium, the Netherlands, and France are within easy reach for travellers living here.

The Weather

England doesn’t have the best reputation for its weather, but the South East receives some of the lowest levels of rainfall and the most sunny days out of the entire country – hence why so many tourists spend time here. People who prefer milder weather throughout the year and nice summers will love staying in a place like Kent.

Good Job Prospects

The South East plays host to many of the government’s job creation schemes. As one of the most important parts of the country, it regularly gains investment from Westminster. Due to its solid transport system, it’s simple to commute to the likes of London, Canterbury, and Dover for work.

There are good job prospects for everyone because of its proximity to the capital. People of any background can move here as long as they want to work.

House Prices

It can be a worthwhile investment to buy a house in the South East. House prices have a history of constantly going up in the long-term, despite the recent problems with the national housing market. 

Investors tend to target the South East because of the pool of buyers and sellers, with many people choosing the area for their second homes and summer residences.

Diversity of Environment

The area is similar to the county of Yorkshire in the north. There are so many different environments to experience. There are cities for those who want to reside in an urban environment and small country villages for those with a more rural calling. There are woods where people can relax and beaches where they can have fun with the kids.

It’s a place where anyone can experience something they love, and this is why it’s such a prime location to buy a home.

How Money Flows in Game Theory

English: The original controller for the American Xbox video game console, sometimes called the "Duke" controller. (Photo credit: Wikipedia)

Gaming has become a phenomenon that has now seeped into the daily life of the average individual. In Ontario, almost 61% of all households have a gaming console. This excludes those that play on computers and not on consoles. The total number of gamers is far greater. With over $ 1.7 Billion spent according to the RateSupermaket infographic on video gaming cost, Canadians are looking to get out and get amongst the action.

The average games spends roughly $ 900 on gaming. This includes buying consoles and an average of fifteen and a half new games a year. Currently, the Nintendo Wii U is the cheapest console as compared to the Playstation 4 and the Xbox One which are 400 and 500 dollars as each. Consoles depreciate a lot too with resale prices being as low as a hundred dollars for the previous Xbox 360. Canada being the third largest gaming population in the world, almost $84 million being spent on games alone.

This brings to light the growth of the gaming industry which has shifted from its niche arcade roots to games which are as grand as movies, both in conceptualization as well as making. The domain of the rich has had the addition of the geeky gamer in it and the wealth of that gamer is still to grow. In 2010-11, the gaming industry in Canada grew almost over 11 percent making it a market which is not only large with almost two billion dollars being spent in Canada alone but also a market which is growing at a steady and strong rate.

It is not a phenomena now, it is a proper player in a market that is growing with promise. Perhaps the greatest factor is the fact that there are a lot of people who don’t put a price on entertainment, which is primarily what the games cater to. The amount of money they spend on entertainment is a large amount to say the least.

With games such as FIFA and Need for Speed running successful franchises which have been running for over two decades, the demand is undying. And it is a blatant lie to say that only young people game with Canada’s average gamer being over thirty years old. Another surprising fact is the number of females that now play games. In what has been called by draconian sources as a predominantly male society, and in an industry which manufactures and caters to a net worth of close to two billion dollars, females comprise of over 46 percent of the total gaming population.

The gaming industry has created a subculture with its own financial system to ensure that the previously underground circuit now receives as much attention as required. The marketing costs for some game titles run into millions and rival those of automobile manufacturers making much more expensive products. For the potential gamer there are now better and more prudent finance decisions that are available. Buying used games has become an alternative way of tapping into the market of previous titles. Consoles become much cheaper and for the gamer who is simply learning the ropes, getting a decent rig is relatively inexpensive as compared to the amount of entertainment that can be gained from it. According to RateSupermaket infographic on video gaming cost over $300 CAD, over 90 percent of Canadian children are gamers. This observance states that the market for the spending gamer is going to increase massively. If 90 percent of children play a computer game then a lot of them will continue to do so when they become adults and active participants in the market. Hence the way to go for games is only up.