I will try to be brief in explaining intricacies of an options trade because the scope of this article does not allow it, you will have to be acquainted with terminology of the options market first.
So here we go…
The Options Market Lingo: The Strike Price (exercise price) of an option is the price at which the options contract is to be bought or sold when the option is exercised.
While the price of the underlying asset, must go up in the equity market (for calls) to turn profitable, and down (for puts) to turn profitable, of course this has to happen prior to the Options Contract expiration.
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An Options Contract that could be traded on a national options exchange is known as a listed option, these have fixed Strike Price and expiration dates. An Options Contract typically represents 100 shares of company.
For Calls, an Options Contract is said to be in the-money if the stock price (in equity markets) is above the strike price of Options Contract. For Puts, an Options Contract is said to be in the-money when the share price (in equity markets) is below the strike price of Options Contract.
For Calls and Puts the spread between the share price (in equity markets) and the Strike Price is the intrinsic value it can be negative too. If it is in the negative it is out of the money Options Contract, and if the Strike Price and share price is same it is said to be at-the-money.
The Price ( to acquire the Options Contract) is called the premium, this very much depends on many factors like a share price (in equity markets), Strike Price, and (time value) time remaining for expiry of the contract and the volatility of the share.
Let us get back to the reason why I am writing this review about Lee Lowell’s Instant Money Trader,
Right now, bunches of savvy investors are getting paid cold, hard cash for nothing more than agreeing to buy shares. Investors are giving them money to buy that they were looking to purchase anyway.
There’s an incredibly profitable, but little-known trading and investment strategy that you will come to love as much as I do because of all the “instant cash” it can generate for you.
From what I understand from the write up on his website. Lee Lowell is recommending the strategy of Selling Put Options (it is not little known anyway and not simple either).
If you are looking to buy shares, what you normally do is put a limit order in your brokerage account keen to buy at a price according to you is a bargain. Instead it makes more sense to just sell a Put Option and get paid upfront (option premium) for selling the Put Option, for a stock you wanted to buy anyway.
Nonetheless to be a smart put-option seller – only sell put option contracts at strike prices at which you would like to own the share if called upon to do so.
Of course, it gets thorny if something awful happens to the underlying share if it gets clobbered and you are on the hook to buy it, even if you don’t feel like owning it any more, and that is the risk aspect.
You benefit from Lee Lowell’s strategy only if your aspirations for buying the share is cash backed and you are willing to hold the stock even if something goes wrong.
You make money by way of (option premium) just by agreeing to buy, if the option contract expires worthless the money is yours to keep.
In sum trading in Options Calls or Puts is similar to placing a bet on the future price of the stock. If you get on to a winning trade the Option Premium you get is all yours.
If you are not fortunate enough with a trade you end up (buying in case of selling a Naked Put) or selling (in case of selling a Covered Call) into a trade that you regard as a liability and you exude painfully.
I always welcome any corrective suggestions to improve this review, simply click ‘Suggest Corrections’ to hook up with me, I promise to update any constructive suggestions accordingly.