Control a Stock for a Fraction of Its Price and Make Money from Stock You Don’t Own
Wouldn’t it be glorious if you could make money off stocks without even owning them? Or if there was some sort of additional asset that you could use to control a stock in your portfolio at a much cheaper price? Well, if you think back to our article about derivatives, then you may have connected the dots and realized that such tools do exist! We’re going to focus on the almighty stock options in particular.
Making money from stocks that you don’t even own.
Options are wonderful. They literally do provide you with more options than just being able to purchase a stock itself. Instead, options allow you to bet on the movements of the particular stock price. And if you’re correct about the stock price fluctuation, then you can profit without even owning the stock in the first place. Of course, if you’ve read our other article about stock options then you will know that you can bet on the stock price going up or down by taking long and short positions, respectively. With that said, all you have to do is purchase or issue a stock option that is tied to an underlying asset. From there, you have the opportunity to profit from stocks that you don’t even own.
You can even make money off a stock without owning it when its price is hardly moving.
This may seem counterintuitive at first, but it will make sense shortly. So how can you make money off a stagnant stock price? Yes, one way to earn money is through capital appreciation of a stock. However, when it comes to options there’s an additional source of income for the party that issues it. Typically, one party will issue the option and in return receive a premium from the buyer in exchange for servicing the agreement. In some cases, the added premium results in profits that would not otherwise exist. There are also cases where the option is not exercised because the underlying stock price did not take the direction that the buyer bet on. This may also happen if the price did not move at all. That said, if you were the one to issue the stock option in either of these cases, then you would essentially receive a paid premium even if the stock price didn’t fluctuate.
Controlling a particular stock for a fraction of its list price.
In our other article about stock options we discuss how you can double down on your position and reduce your risk all through the use of these derivative types. Of course, you’ll want to continue reading it as it touches upon strategies for when you decide to actually purchase the underlying stock. In these scenarios, more elements come into play which call for more complex strategies. All you need to know for now is that you can use stock options to control the effects of fluctuations in the underlying asset’s price. Not to mention that these stock options are typically much cheaper than the stock itself. Thus, this asset represents your low-cost method of controlling various stocks.
When used correctly, stock options can increase your profit potential exponentially while also reducing your risk significantly. Our Rich Dad Education trainers will introduce you to options basics and explain how you can control a stock for a fraction of its price, profit from stock you don't own, and make money when the price of a stock is barely moving at all. With all of this at stake, why would you wait? Find out more information today. Be sure to learn about all the ways Rich Dad Education can help you reach your goals.
Used correctly, stock options can increase your profit potential exponentially while also reducing your risk significantly. Our Rich Dad Education trainers will introduce you to options basics and explain how you can control a stock for a fraction of its price, profit from stock you don't own, and make money when the price of a stock is barely moving at all.
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