How Entrepreneurs can Benefit from Option Investing

Ivan Widjaya·June 8, 2011

Entrepreneurs often have a difficult time deciding where to invest their money. There are many choices which they can choose. If you are an entrepreneur, you can use your money by expanding your business. This can be increasing advertising budget or opening a new store. If the economy is not in good condition you might need to reconsider your decision to expand.

Currently U.S. jobs growth is slowing and it has fueled concern that the global economy is weakening. You may realize that US Dollar is still going down this year and gold has just recently reached another new record high.

Businessman might find option investing profitable. One thing for sure, you do not need lots of time investing in option. You can still focus on your business. Half an hour a day is enough. It really doesn’t take a lot of your time. You can also try spending two hours in the weekend to choose the option you want to buy or sell and execute it on Monday. For the rest of the week, you can just monitor the price for five minutes.

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Option investing 101

An option gives the holder the right to buy or sell an asset at a specific price. There are two types of options: call and put option.

Call option gives you the right to buy an asset at a specific price while put option gives you the right to sell an asset at a specific price.

Imagine stock ABC at $100. For example, you can buy the call option at $110 for $10. This means you are buying the right for $10. If the stock reaches $120, you can still buy the stock at $110 and make $10 profit. But if the stock drops to $90, your option will be worthless and you loss $10 which is the price you spend when buying the option.

Is option investing risky?

Many people consider option investing to be risky and hard to do. It is not all true. With the right strategy option is safer than stock investing. It is also can be easy to do. You do not need to know various option trading strategies to be make money in options. Choose one or two strategies and master that strategy.

You can start option investing by opening an account at an option broker. I recommend you to open an account for free at optionsxpress.com. You don’t need to fund the account but can use their demo trading account. From that demo trading account you can learn how option works and start implementing your strategy. Once you are confident you can fund your account and start real trading.

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