admin As a DoorInvestor, my primary investment vehicle is real estate, specifically multifamily. That is always my plan. But in my (and your) journey of investing, real estate does not have to be the only vehicle, because there are many choices out there. I would like to dedicate this blog post to talk about another adventure experience – Stocks Options.
(I blogged about Forex as another investment vehicle before, click here if you are interested to read about it.)
Trading stocks options is different than trading stocks. In this post, we will focus on discussing the 2 differences that we deem valuable.
Time Element
If you were to trade stocks, you can pretty much buy and hold forever. The price may go up and down; but if you are not in a hurry, nobody will be forcing you to sell your shares. The benefit of this is, you do not need to time the market, and you can ride the wave and wait until it goes up. Of course, the flip side of this is, there is opportunity cost for you to hold on to this positions and especially while your capital can be invested somewhere else.
With stock options, you not only need to know the direction (long or short), but you also need to time it properly, because options will expire! If the price moves up (or down) after your option expires, you will be losing out despite you picked the right direction.
Leverage
There is the availability to use leverage in both stocks and stocks options. The difference is, typically stocks give you 1 to 1 buying power, but options give you much greater leverage to hold more positions with a smaller deposit. When you treat this as a trading business, it is not practical to always move a large sum of capital to open positions. Instead, you want to maximize your opportunity by using as least capital (deposit) as possible to control as many shares as possible.
Advance Strategies
When you buy stocks, you are either speculating that the price will go up or down (a.k.a. long or short). But with options, you can actually deploy advance strategies that will allow you to profit even when the stock prices goes side way, or side way + up, or side way + down… etc. You have many more combinations to go with.
Learn the System
While you may be eager to dive in and place your bets, I would suggest that you do your due diligence (just like in the real estate market), and learn about the system first. To help shorten your learning curve, you should consider this education system which will show you from the beginning to the end about the various stocks options trading concepts, including how to structure a trading strategy that may produce continuous income. In addition to your real estate portfolio, stocks options income system can be a nice alternative to provide further income stream!
