There is plenty of money in the stock market. However, not everyone can get the money from there. Some people may get a lot from the stock market but has lost about a lot of money there. It ‘very indecisive. Sometimes, then, is the loss of money, but after a few days, you can earn a profit and sometimes reversed. So, how should we do to get the money from the bag? Usually, there are two ways to obtain money from the bag, which are investing and trading. The difference between trade and investment is trading involves buying and selling of shares or future option, within a short period of time, and investing is buying shares or future option and hold it for a period rather long, usually one or more years before selling it.

What is the difference between the parties, the future and option? What we do know is that it is much cheaper than the share and future, it is usually ten times lower than the price. So if you have a sum of money that enough for you to buy 100 shares, you can use this sum of money to buy the 1000 option. And the return on investment is almost the same option, and between the parties. Therefore, they earn about ten times if you buy the option, rather than share or future. However, the disadvantage is that if you lose on the trade that you lose as much as tenfold. When the option trade, the amount of money you can make a profit and losing is almost as if you were trading shares. However, we need a lot of money to buy shares than to buy the option. This means that the percentage of profit and loss account for the purchase of an option is much more than parties. The example is like when you buy $ 10 for a unity of action and $ 1 for one unit of option. When the price drops to $ 0.10, the percentage reduction for the purchase of shares is 1%, but the option to purchase, the percentage of loss is 10%. That ’s why the percentage of profit and loss account for the purchase of options is huge compared to buy shares even if the price fluctuates in a small amount.

Due to the high profits and losses, when the option to purchase, trade or investment option is just like gambling. It ‘quite normal that the return on investment is above 100%. But it is also quite normal that you may lose all your money in investments or trading. In order that we may gain more than lose, you must know some basic option trading strategy and technical analysis. The option is different from that party. The option has time value, and that parties do not have time value. The value of depreciation write-off not because of the passage of time. It ‘only affected by supply and demand and also the company performance. However, the option value of depreciation, when the time is past. When the time reaches the option expiration date, there is no time for the value of this option. That ’s why it is necessary to use the strategy for trade, so that you can minimize losses and maximize profits.

The two basic option trading strategies are bullish call spread and bear put spread. Bullish call spread is used when the stock price is expected to rise in coming months, while bearish put spread is used when the stock price decline is expected in the coming months. Steps that are involved in this strategy is the money for the purchase and sale of option out of the money option. The price is the option that has time value and intrinsic value and that, out of the money option only has time value. When the stock price moves to the side (generated money side) for the option money and generate profits out of the money option, cause the loss. However, less than the profit and loss is the net result that generated by this strategy. When the stock price moves over the out of the money strike price, the profit will be maximized. Continuous movement of the stock price for the side not generate any profit. In this situation, there is close to the positions of profit from the market.

If the stock price moves to the side (opposite side that cause loss), in the money option ’s value and the depreciation out of the money option to generate profit. However, the profit that is generated out of the money, is limited to the price that you sold. The difference between the price of ’s in the profit and loss ’s money is a negative value. This is because the profit that is generated out of the money option is less than the loss that is caused by money option. Out of the money ’s profit option is limited in this strategy and the option price ’s loss is unlimited. If the stock price continuously moves the negative side, you may lose all your capital. So, what is the difference to buy naked option and the option to purchase through the dissemination strategy? The difference is that you can lose more money if you buy naked option and lose less money if you buy the spread. This is because they do not generate any profit when you buy only the bare option, which profit is generated from out of the money option if the stock price moves to the downside. The disadvantage of spread is that the Commission, which is charged by the broker company, it is twice as much as the naked option. This is because only the naked option position and, spread between two locations. Each location will be charged separately Committee.

Furthermore, in order to sell out of the money option in the dissemination strategy is to minimize the loss of time value of money in option. In reality, both in and out the money option ’s time depreciate the value when the time is past. Why not have your money out of the option and, therefore, we can keep the money we received from the sale of such option. When the value of this time out of the money option has depreciated, we used a lower price to buy back the option. So, we sell at high price and buy back low-priced, so they earn money. The money we earn is usually enough to cover the loss of time value of money in option. However, you lose the intrinsic value of option if the stock price moves in the negative direction.

So, bullish call and bearish put spreads are two of the very basic option trading strategies. However, it is not guaranteed 100% to win the scholarship. You still need to learn to predict the stock price direction accurately using basic technical analysis and news.

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