Robert Kiyosaki made personal financial planning extremely popular amongst
common folks. He taught the investment strategy of well-informed investors in
real estate and stock option trading in his famous books and audio tapes.
What is option trading?
Stock option trading is tool for creation of wealth as well as protection of
wealth. It's essential that an investor should master stock option trading
strategy to make money from bull or bear market otherwise small investor has to
struggle with small stock market returns and suffers the devastation of market
declines.
What's the challenge in stock option investing?
The biggest obstacle for new investors is to understand how stock options
work. In this article, we will explain day, future or option trading using
'golden ratio' of Fibonacci sequence.
Successful traders need to follow a set of rules consistently. These set of
rules formed a trading system for an option trader. It's advisable to take some
option trading course to know it in more detail.
Here are some of my favorite stock option trading strategy and systems.
Option trading is nothing but leverage trading. It's a strategy of high risk
and high gain if not done properly. Biggest lesson in option trading is to
follow your own trading rules that are based by your research. You should not be
victim of your greed and emotion.
You need to record all your success and failures. Your stock option trading
system and strategies needs to be back tested with lots of samples to ensure you
have positive expectancy. Positive expectancy means you have have net profit
after several trades on a same stock.
Now a day, you can do future and option trading online and you can also do
market research on line. Your dependency on option broker is much less.
Let us look at a stock option trading system, which we are testing in our
investment club:
1. May 18th (Friday) was the expiration date; we bought three strangles of
Google on 14 May, (Monday) that are 2 strikes out of the money for that
expiration i.e. $380 and $420 where spot price of google was $400.
2. We watched the price quote most of the day for Tuesday, Wednesday,
Thursday, and even Friday.
3. We sold one strangle because price of the total strangle is profitable by
$110.
4. We squared open position during intra day rally of google stock due to
some news event.
