2 Tips To Find A Valuable Options Strategy

By: Tim Melvin

One of the most dangerous endeavors that individual investors and “wannabe” traders can engage in is options trading.

Stock and index options bring with them a degree of leverage and time restrictions that have the capability to blow up an account in pretty short order, something that happens on a pretty regular basis. It is hard enough to pick stocks that go up, but to do so in a fixed time frame is even more difficult. To top it off, if you pick the wrong strike price you can get the direction and timing right and still lose money.

The individual trader is trading against large institutions with pricing, modeling and trading capabilities that are far beyond their own. All too often the retail trader's role in the options market is to provide lunch money for the trading desks and market makers.

Start With A Company's Business Valuation

There is a way that individual investors can use options to earn higher returns and add to the overall return of their current portfolio. This strategy takes advantage of the fact that most option traders think only about the value of the option and not the value of the underlying business.

At the same time, most value-oriented investors are not fans of options, as they view it as a high-risk leveraged trading activity. We can take advantage of these two groups' lack of interest in each others strategy to use options to enhance a value portfolio. Continue reading "2 Tips To Find A Valuable Options Strategy"

3 Reasons To Quit Trying For The Impossible With Your Investments

By: Tim Melvin

Imagine that, back in January, you were given an ironclad forecast of how the world and economy would shape up in the first half of 2014.

You would have known in advance that the U.S. GDP would have a negative print for the first quarter, that Ukraine would explode into violence with Russian involvement -- and that the much-touted housing recovery would begin to show signs of slowing down.

You would have known that Iraq would see sectarian violence, and that Islamists separatists would successfully attack major cities and seriously destabilize the region. You would have had information showing you that the prices of important food items like coffee, hogs and cattle would experience double-digit price surges.

Related: 5 Smart Money Managers Taking A Shine To Gold Miners

You would have foreseen the strict, new environmental regulations imposed on industry and utilities. The slowdown in retail profits and decline in consumer confidence would have been no surprise to you, because you would already be in the know about these things. Continue reading "3 Reasons To Quit Trying For The Impossible With Your Investments"