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Understanding Stock Options

Filed Under (Uncategorized) by Arthur Kaliisa on 01-04-2008

Summary: You hear about stock options all the time, but what exactly are they? Stock options can actually be a great financial instrument that allows you to get the most out of your investment money.
 You hear all this stock jargon on television, in movies, in books and it’s possible you have no idea what they’re talking about. With terms floating around like bonds, bull market, bear market, and options how do you make sense of it all? Reality is, you can’t make sense of all of it all at once; you need to take it one step at a time. So today let’s focus on stock options and understanding what those are.
Stock options essentially give you rights to buy and sell and allow you to do more with your money. What options do is allow you to greater diversify your portfolio and take better control of your money. When you have a stock option, you have the right to carry on a future financial transaction with underlying security. So you can buy a stock at a later date for a price you set earlier and you can sell a stock for a price earlier agreed upon. It’s a financial contract to which, if signed, the other party must adhere.
Options usually include:

  • Whether or not the option holder can buy (call option) or sell (put option)
  • The amount of whatever is being considered (
  • The price agreed upon (known as the strike price)
  • An expiration date for the option
  • Settlement terms
  • How the option is quoted in the market

After this there are a few different options to choose from:

  • Exchange traded options: standardized options that go through a clearing house, pricing models available, and includes stock options, commodity options, bond and interest rate options, index options, and options on future contracts
  • Over-the-counter (OTC) options: not listed on exchange and takes place between two private parties, can be individualized to meet specific needs, one party usually a well capitalized establishment, includes interest rate, currency cross rate, and swap options

These are the basics of options however this is only the surface. There are more options within the options and the best way to decide if and what options are best for you is to talk to your investment advisor. Now you know the fundamentals, you should be able to go in with some degree of knowledge and competency.
Money.Tips.Net

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What Are Penny Stocks?

Filed Under (Uncategorized) by Arthur Kaliisa on 01-04-2008

Summary: You’ve probably heard the phrase penny stock thrown around without really knowing what it means. You’ll soon find out that penny stocks, while a potential lucrative business investment, carry a high degree of risk and should be approached with caution.
 Penny stock has a nice ring to it; penny indicates inexpensive and we could always go for something a little less expensive, right? However, what exactly is a penny stock and what are the risks associated with it? While penny stocks may be cheap and exciting (and potentially lucrative), the risk factors needs to be considered and you need to decide whether or not it’s worth it for your money.
A penny stock is any stock bought outside the major markets (NYSE, NASDAQ, AMEX) and isn’t usually looked upon favorably by traditional investors. A stock is usually considered a penny stock if it has a market cap under $500M dollars. When you buy a penny stock, you’re buying stock traditionally in a very small company that’s trying to get going on the business track. Because the company is so small, the stock shares are unbelievingly cheap because the company is really just looking for investors so they can expand. Also, because the stock shares are so inexpensive, penny stock investors tend to buy a lot and spend a lot of money.
A very high level of risk accompanies this kind of investment, however. Events can go one of two ways: either the company will take off, potentially making you a multimillionaire, or the company will tank, leaving you with nothing. The outcome of your investment hits two extremes and you need to decide whether or not the risk is worth it for you. You also risk some degree of fraud when investing in penny stocks; without the company in the stock exchange mainstream there’s little verification of legitimacy. Over-the-counter penny stocks are especially speculative because their legitimacy is definitely questionable.
If you can afford the risk, investing in penny stocks could be exciting and could lead to exciting outcomes, but you really just need to be careful. Use prudence when conducting this business and if anything seems out of the ordinary or fishy, back out of the deal. It’s your money and you should be careful with it.
Money.Tips.Net
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Understanding Stock Brokers

Filed Under (Uncategorized) by Arthur Kaliisa on 01-04-2008

Summary: There are so many different facets to the stock market and the stock broker is only one of them. With stock brokers, to get you started you need to know what they do and the different kinds you can hire.
 Once you feel you have a firm grip on what exactly the stock market is, you’ll then face the question: what is a stock broker? You hear about stock brokers everywhere, whether that be in the movies, on the news, or in the elevator up to your cubicle office—it seems like everyone who’s a serious investor has a stock broker, so what exactly is one and what do they do?
A stock broker is, in the simplest terms, a middle man for investors. Your stock broker takes your money and invests it where he advises, where you tell him, or both. He (or she) handles the official transactions and should advise you when to buy or sell. One of the great things about stock brokers is that they take much of the stress of investing off of you. You don’t have to deal with those transactions or their complexities, but conversely you don’t necessarily have as much control over your money. Of course, your money is still yours, but because you’re not the one dealing directly with it, it’s harder to ensure everything’s okay.
There are three different types of stock brokers: execution only, advisory dealing, and discretionary dealing. Execution-only brokers will only do what the investor wants. Advisory-dealing brokers can advise the investor on when to buy and sell and what stocks to invest in. Discretionary dealing is even more loose in that the broker has the freedom to make investing decisions for the investor (this one takes a vast amount of trust). These options do give you more control over your money and allow you to delegate more or less control to your broker.
Stock brokers usually work by charging a flat fee and a commission percentage to the investor. Depending on how successful and many times the broker will adjust their fees to how well the market is faring. If you want to invest wisely, then you should probably hire a stock broker just because it’s their job to monitor the stock market and if you hire a good one, you’ll benefit. Do your homework when checking out brokers and until you can really trust them, guard your money carefully.
Moneytips
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