Stock Option Trading: greater return

Stock option is the ‘right’ to purchase a stock at a given price within a specified time. Stock option trading is largely dependent on certain factors, such as name of the associated stock, strike price, expiration date, and the premium paid for the option, plus the stock broker’s commission.

Stock option trading involves trading standardized options contracts, which are listed by a variety of futures and options exchanges. The open-outcry marketplaces are Philadelphia Stock Exchange (PHLX), American Stock Exchange (AMEX) in New York City, the Pacific Exchange (PCX) in San Francisco, and the Chicago Board Options Exchange (CBOE).

The International Securities Exchange (ISE) and Boston Options Exchange (BOX) are included in the electronic marketplaces. As a general rule of thumb, investments that offer a higher return on your money tend to have greater risk. Conversely, investments that have lesser returns tend to be much safer. Low interest rates. On the opposite side of the investment spectrum you’ll find the stock market and every type of investment that goes with it.

Over time, you will very likely experience a far greater return than those safer investments. While the 3 month CD might offer an average annual interest rate of 3% to 5% over time, the stock market investments will provide average annual returns of 5% to 15% over time. Rather than investing in all aspects of the investment spectrum as most advisors would suggest, eliminate everything but the most conservative investment and the most aggressive investment. With only two investments from which to choose: safe bonds and stock options.

Stock options are among the most aggressive investments available and therefore offer the greatest potential for big returns. The returns as high as 800% within a few months on options trades. This investment strategy requires a higher level of investment knowledge because option trading can be complex. Remember, articles like these are not considered investment advice.