This article will explain the fundamentals of the put option buy transaction so you can make money at home. This is a strategy that is employed when you believe that the underlying stock will decrease in value over a predefined period of time. As you read on, you'll learn about a home business strategy that made me the money to invest and how to DOUBLE THAT MONEY within a year with a proven investment method; this is the same method that the rich and affluent upper-class has used to leverage their income in order to make more money.
The Concept Behind The Put Option Buy (To Open):
A put option is a contract between a buyer and seller, whereby the buyer is given the right, but not the obligation, to require that the seller buy a specified number of an underlying stock at a fixed price (strike price) on or before the expiration date (third Friday of every month). The put option buyer is hoping that the underlying stock price will DECREASE (below his strike price) prior to the expiration date, so that he could sell the put option and make a large premium (money) off the difference between the strike price and the lower market price; put option buyers are rewarded $1 for every $1 movement that the stock makes below the strike price! Given the low costs to buy put options (usually $1 to $3 / share), you can see how quickly your money could exponentially increase.
By the way, this also applies to call option buy orders, except, with call options you are hoping that the stock increases above your strike price prior to expiration. The following are key definitions that will help you understand the put option guidelines and make money at home:
Expiration Date: Options for the underlying stock are available for the current month, the month after, and every three (3) months; regardless of the month, all put options expire on the third Friday of the month in which you choose.
Time Value: With put options, you are paying for time, as you don't own anything (i.e., stock). As such, put option prices are higher the more time you have. In all cases, you are hoping that the underlying stock's price will decrease (below your strike price) within the available time. On the third Friday of your expiration month, your option will expire worthless if the stock price has not decreased below your strike price.
Contract Size: Put option contracts are bought (at the ask price) and sold (at the bid price) at sizes of 100 shares (i.e., one (1) option contract controls 100 shares of stock).
Option increments: Option strike prices are available in $2.50, $5, or $10 increments / share
Pricing structure: The price of the put option is based on the strike price, relative to the price of the underlying stock, and the length of time before expiration; the longer the time, the higher the price. The following is the pricing scheme for each of the available option contract categories:
1. In-the-money: An option whose strike price is higher than the market price of the underlying stock. This is the point at which you want to be prior to the expiration date, as you make $1 for every $1 decrease in the underlying stock; you will make money at home if you find yourself in this situation! As such, the price of options in this category is the highest, as the price of the underlying stock is already lower than the strike price.
2. At-the-money: An option whose strike price is equal to the current market price of the underlying stock. The price of options in this category is moderate as there is a lower probability that the price of the underlying stock will decrease below the strike price by the expiration date.
3. Out-of-the-money: An option whose strike price is lower than the market price of the underlying stock. The price of options in this category is the lowest as there is even a lower probability that the price of the underlying stock will decrease below the strike price by the expiration date. However, the potential to make a lot of money exists in this category and at-the-money strike prices due to the lower cost to buy-in and the potential to make $1 per each $1 reduction (below the strike price) in the underlying stock.
Now, let's sequence this altogether in a mock put option transaction. Let's say that it's March and you purchase ten (10) contracts (controlling 1,000 shares of underlying stock) of a put option expiring in April (third Friday) for XYZ Company at an ?out-of-the-money? strike price of $50 and an option price of $0.75 / share; the stock is trading at $52 / share. You pay $75 for each contract, which equates to $750 for 10 contracts ($0.75 X 10 contracts X 100 shares / contract). Prior to the expiration date, the stock dips $4 to $48 and you sell your put options at $2 ($2 in-the-money), thus making $2,000 and securing a profit of $1,250 ($2 X 10 contracts X 100 shares / contract minus the purchase price of contracts).
Now if you're like me, you're probably thinking that this sounds great, but how do you make the money to invest? Don't worry, I was asking the same thing before I learned about this home business methodology (by fluke). Now, for the record, I don't consider myself a home business type of person, as my enthusiasm lies with stock and option transactions. What I found though was a simple and structured online home business method that actually began to make me real money. It's called the "Independent Profit Center" (IPC) and it happens to be one of the best online strategies, along with a few of my favorite "spread options", that I've seen to make money online.
This opportunity is different than other home businesses because it simply works, which shouldn't be underestimated in this recession. I think it works because the system is laid out so clearly for you and you are shown everything you need to know in a 5-hour video tutorial (located on their website); there are no confusing books or CDs required with this one. You will literally have your website up within an hour and be making money online within 24 hours.
IPC doesn't hide anything from you and you know exactly what this business is about before you apply. If you go to the website below, you can join a FREE webinar LIVE online and see why IPC is such a smart and profitable decision that will make you money online. I guarantee that after seeing this webinar you will be blown away by the potential of this new program to make you money at home.
IPC is a legitimate home business that truly works for the average person. The training, support, and proven system are all there in order to make you money at home.
At some point we've all played the ?wouldn't it be nice to live there? game, where we press our noses up to the estate agents window like hungry children eyeing up the cakes in a bakery, wishing we could afford the homes that are way too expensive for us. We all have aspirations far beyond our wallets from time to time, but more and more first time buyers are finding that they simply cannot afford to buy anywhere as property prices in the UK have rocketed to such levels that the first step onto the ladder has begun to look more like an impossible leap.
Now a new breed of buyer has begun to emerge, or maybe I should say ?evolve?, because that's what happens when nature finds a way around a problem, who have decided to tackle the issue of affordability head on, they are the co-buyers. If you've not been near your TV, radio or favorite newspaper recently you'd be excused for not having heard of this home buying movement. Put simply, co-buying is where two or more people buy a property together to join funds, divide of all the costs, and afford to buy years sooner than they could have done alone. Nothing new there, as friends and family have been doing that for an age now, what is new is the rise in the popularity of searching for your ideal mortgage mate on the internet.
Richard Cohn, Founding Director of Shared Spaces Limited, introduced us to the concept of co-buying with SharedSpaces.co.uk, launched in December 2005. He explains, ?I flat shared for years before buying, and made some great friends along the way, and it was during this time that I came to the conclusion that was to lead to the creation of SharedSpaces. If you can flat-share with complete strangers with great success, why can't people take it to the next level and buy together??
Of course there is more to it than just that because buying is a far bigger financial commitment than renting, but Cohn suggests that with the correct legal framework (a document called a ?Deed of Trust? that costs only a few hundred pounds from any solicitor that protects your legal rights and provides a roadmap for the relationship), mortgage payment protection insurance (to protect you and your co-owners from hardship should you loose your jobs or are unable to work due to illness), and time (as much time as you need to get to know your potential co-buyer well enough to call them a friend or a business partner in the process), there is no reason why you cannot have a successful co-buying experience.
SharedSpaces.co.uk has over 2,500 registered members across the UK looking for someone else to buy a property with, joined by a common goal, to fight the affordability gap. Whether you are a key worker or a city high flyer if you're looking for a mortgage mate, a property pal or a future friend to buy your first home with there seems to be plenty of people to choose from. I don't know whether co-buying solves the long term problem of property prices rising faster than salaries, but it sure does seem to offer an option for those who have been left behind.
At times we all have aspirations far beyond our wallets, but an increasing number of first time home buyers are finding that they simply cannot afford to buy as the first step onto the ladder has begun to look more like an impossible leap.
Both Chris310 & Richard are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Chris310 has sinced written about articles on various topics from Finances, Surveys and Finances. For more information, please feel free to visit my IPC website at . Chris310's top article generates over 6600 views. to your Favourites.
Richard has sinced written about articles on various topics from Online Marketing, Skin Care and Hoodia. Richard Cohn is the Founding Director of , the UK's co-buyer network website. "I have always had a passion for property, from my education as a Surve. Richard's top article generates over 110000 views. to your Favourites.