Mar 192015
 

A couple days ago I made $220 in about 5 minutes from trading options. Today I will explain exactly what I did, why I did it, how others can do the same if they wish to, and the risks involved with this maneuver. Out of all the option trading strategies out there, buy write options are probably the least risky, especially done with underlying large cap, blue chip stocks. They also require minimal knowledge, no money down, and are accessible to the general public. 😀

So first, what the heck is a Buy Write options strategy? Simply put it’s when we buy a stock, and then write (sell) a covered call against the stock we just bought heh. 😉

The reason we might want to implement a buy-write is because we believe the stock will not move a lot in either direction in the near future and we want to generate some extra returns in the mean time!

Through a suggestion from a friend I decided to perform my first buy write strategy earlier this week. I chose to do it using the National Bank of Canada, which is one of the largest financial companies in the country with a strong balance sheet and growing profits. 🙂 Canadian banks are ideal for doing Buy Writes with because they are fairly stable and grow their dividends over time.

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So let’s quickly run through my thinking process. What is the purpose of buying a stock and then writing a call option against it? For me, it’s to make some quick and easy money with minimal risk, but a high chance to beat the market. 😀

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Feb 242015
 

In self defence class we learn to fight… so that we won’t have to. Personal finance is very much the same way. 🙂 The best thing that money can give us, is the freedom to not worry about money anymore. Sometimes we can become so focused on our finances that we can easily forget about actually living a life. To me financial wealth is not simply about having money. It’s more about having better options in life. A lack of money is a great disadvantage. Poor people have a greater affinity to stay poor. Their lack of resources keeps them from having access to better opportunities and choices that many middle class and rich people take for granted. Having a limited amount of choices can lead to further unsatisfactory circumstances, so it becomes a self-reinforcing cycle.

We spend a lot of time planning our budgets, building up our savings, and looking for profitable investments, but in the end we should realize that doing all this work is not about the money. It’s about the freedom and the awesome choices we’ll be rewarded with! 😀 We do not want to become obsessed about “money,” in and of itself. We don’t want to turn into those kinds of people who think that the best thing about wealth is that it allows them to buy material things. 😐 If that’s what they really want to believe then I wish them good luck in life. 😛

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There’s a popular story that demonstrates the silly nature of materialism in the world today:

A successful businessman bought a brand new BMW M6 convertable. He parked it right in front of his office so that he could show it off to his fellow co-workers. As he got out his vehicle a passing garbage truck lost control and side-swiped his car, ripping off the door on the driver’s side. The police quickly arrived and the businessman began ranting hysterically that his new BMW was now ruined.  😡 After 10 minutes of profuse shouting and cursing, the businessman was finally able to calm down. The police officer then said to him, “You are so focused on your car that you don’t notice anything else. I can’t believe how materialistic you are.” The businessman looked confused. “What do you mean?” he asked. The police officer explained; “Haven’t you noticed that your left arm is missing? It must have been torn off in the accident.” The businessman’s face went white. “OH NO!” he screamed. “My Rolex!!”

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Nov 212014
 

The following post is written by staff writer, Peter.

Many finance bloggers are saying that they start to get a lot of search traffic regarding binary options and binary options trading. Some people even mail us asking if they should use binary options in order to save money or to increase their monthly revenues. For this reason I have created this very short guide that will tell people what binary options are and how they work.

When trading binary options you will have to predict into what direction the value of a financial asset will move during a certain time frame. The value of an asset can either go up or go down during a certain time frame. As such, seemingly your winning odds are 50%. Your winning odds would indeed be 50% in case you would be investing randomly without any thought behind it. However, that’s not how you are supposed to do it. You will have to make predictions based on real information such as research and so-called technical analysis, which is the analysis of the movement of assets using charts.

Does all this sound complicated? – Well, yes. And it actually is. The most important thing binary options companies do not reveal is that it’s actually very difficult to win in binary options. While you definitely can win in binary options, you actually need to put in some effort to make it.

There are of course a lot of scams out there as well. Unfortunately it seems that a very large number of binary options companies are pure fraud. There are definitely legit ones out there but for the average dude it’s very difficult to distinguish the good ones from the bad ones. While you can find reviews of various binary options sites on different blogs and web pages, the majority of these sites get paid to post positive reviews, so you can’t even trust these sites either.

So, all in all, it might seem a good idea to just skip binary options from the list of investment opportunities you should be interested in. Instead, if you really want to trade and to invest into something, you should do this with legit Forex trading or traditional stock trading. Binary options are expected to change in the future and to more closely resemble to legitimate trading. This will happen once various countries decide to officially legalize and regulate this business. But this process is not expected to take place until several years in the future. So, in short, (for now at least) you should stay away from binary options.

 

Jun 262014
 

Last month I wrote how to make some easy money by selling a put option for Teck Resources. The option expired several days ago and I made $48. Cool beans! Since my trade was successful I decided to do it again. So after the option expired I sold another put option for TCK.B for the strike price of $23, that will expire in August. The most I could potentially make from this trade is $52.76 🙂 By repeating this simple trade on a regular basis I could make a few hundred dollars every year with minimal risk! Not a lot of money, but better than nothing.

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Just like before, there are only 2 potential outcomes of this event.

Scenario 1- By August 16th TCK.B shares stay above $23/share. So when the contract expires I keep the $52.76 premium with no strings attached
Scenario 2- By August 16th TCK.B shares fall below $23/share. The contract is exercised and I’m forced to purchase 100 shares, but still keep the $52.76 premium.

Ideally I would like scenario 1 to happen, but scenario 2 isn’t a bad outcome for me either. When I originally bought 61 shares of Teck Resources years ago I purchased the stock at roughly $33 per share. I realize now that I overpaid. Teck is one of the few companies that has under performed in my portfolio 🙁 14-06-tckshares

But investors have a tool at our disposal called dollar cost averaging. This means if our investment falls after we buy it, we can simply buy some more to lower our average purchase price. Since the whole point is to buy low and sell high, by lowering the average price that we buy at we don’t have to wait for the stock to increase as much to make a profit.

So even if my option gets exercised I’ll be happy to pay $23 per share which will lower my adjusted cost bases to about $27 instead of the current $33. Selling options is fun 🙂 Since no leverage is used there are no extra costs like interest. Speaking of interest, I recently wrote an article for mint.com showing how faster credit card payments can save consumers a lot of money.

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Random Useless Fact: 

The World Cup can perform miracles

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May 152014
 

I just sold my first covered call this morning 🙂 The proceed was deposited into my trading account and I am now $68.76 richer, yippee! I should do this more often (^_^)

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What does it mean to sell (or write) a covered call option?

A “call option” is a contract between a buyer and a seller where the buyer has the option (but not the obligation) to purchase stocks from the seller at a set (strike) price, within a certain time period. If the option is “covered,” like in today’s example, then that means the seller already has the underlying stocks. Therefore, selling a covered call simply means giving someone else the option to buy your stocks for an agreed upon price point. Since you are potentially giving away a part of the stock’s future gain the buyer has to pay you money 😀 (called the premium)

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