Is Options Trading a Risky Business?

Most people consider options trading a risky business. While it is true that no investment is without risk, it is possible to limit or manage your risks, just as you would with any business.

If your option strategies are more like betting or gambling, if you follow some sort of intuition or sixth sense, then you will lose money. If your strategy is to think of options trading as a business and you know about managing a business or you are willing to learn, then you can make money.

Any business owner looks at the cost of goods and the potential profits to be made. In other words, what an item can be purchased for and what it can be sold for. Investments should be looked at in the same way.

A business owner must also be willing to look at how much loss is affordable and acceptable. There will always be items lost or broken during shipping. Someone is likely to drop that crystal goblet and break it before it goes into the box. But, when an item is simply too delicate to handle, there will be too much breakage, too much loss and a business owner will probably decide not to sell that item.

If you are new to the “business”, it is a good idea to learn the option strategies used by experienced investors. There are plenty of investors out there willing to teach you their system for a price.

There is a great deal of free information, too. But, this is truly one of those situations where you get what you pay for. No truly successful investor will tell you everything there is to know about his option strategies for free. Why should he?

But, before you buy a book or download an e-book on the subject of options trading, do a little evaluation. Ask some questions to make sure that you are not wasting your money.

First, is this a system that works, regardless of the economy? There are profitable option strategies that work regardless of the state of the economy. This is not like the stock market, although it is affected by it.

Second, is this a get-rich-quick scheme or real education about managing this kind of a business? Is the system based on business fundamentals, such as profit, loss, expenses, overhead and return-on-investment?

After reading this article, you should know what the answers to those questions should be. You are looking for an options trading business, not a scam.

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Best Stock Investment in 2010 & Beyond

The best stock investment in 2010 and beyond could be a penny stock. But that’s pure speculation. The best stock investment available to any stock investor offers investment opportunities previously not available to every-day people. And its profit potential knows no boundaries.

Millions of American investors own just one form of stock investment: equity mutual funds that are offered by investment companies. There’s only one real shortcoming with these funds. Most mutual fund companies limit your choices to the conventional: a variety of domestic and international equity (stock) funds, and perhaps a few specialty funds. This limits your investment opportunities.

On the other hand, your chance of finding the best stock investment in 2010 by sifting through the thousands of issues listed on the major exchanges is nil. It simply won’t happen even if you’re cheating - not in one lifetime, anyway. The thing that makes investing so interesting to me is that no matter what happens in the economy, somebody gets rich by being in the right place at the right time.

The problem for most people in the past was that even if they had a great incite, they did not have enough money or know how to invest and make money from it. There was no easy economical way to place your bet. Now there is, in the form of a stock investment called an ETF (exchange traded fund). These are simply baskets of securities that trade like any other stock on an exchange. Now the small investor is on a level playing field, because the variety of these funds offered is extensive and still growing.

As they say, there are always investment opportunities somewhere. Now you know how to participate. Let’s look at some examples, starting with the recent past. Gold went to a record high in 2009 and might continue to climb if the dollar falls further. You could have simply made a stock investment before gold prices soared by buying an ETF. When the stock market got crushed in 2008 and early 2009 you could have been one of the few who MADE big money by simply owning an inverse ETF that goes up when stock prices fall.

Now let’s look into the future. If you think that the government’s actions in dealing with the financial crisis will result in higher inflation and interest rates… how can you protect yourself and profit at the same time? There are ETFs out there that amount to a bet on interest rates; and some that go up when the price of basic materials like copper, aluminum and steel go up.

How can you profit when real estate or oil prices surge? A simple stock investment, whether for $500 or $5 million, in the right exchange traded fund and you’re in. The list of investment opportunities goes on and on. Now you can invest in a broad array of alternative investments not readily available to you before. And you can put together a TRULY BALANCED portfolio through your brokerage account over the internet.

Go to your brokerage account, or another investment site, or Google “ETF”. Spend some time getting familiar with the list of exchange traded funds available. If you have an investment idea, you’ll probably find a fund that will accommodate you. Especially if things in the economy get dicey in the not-too-distant future, the best stock investment in 2010 and beyond will likely be on this list. Now even the small investor knows no boundaries.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

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