Were You Hurt By The 2008 Stock Market Massacre?/>

It's been a tough year for most investors.

The truth is: much of that pain was avoidable. When markets are rising, few worry about losses.  Professionals tell you to allocate assets; diversify; buy and hold; invest in mutual funds and trust professional money managers.  Did any of that advice prove to be helpful?  Isn’t it upsetting to do
'what you were supposed to do' – and still suffer large losses? Why doesn’t anyone teach you how to protect your assets?

Conservative, risk-reducing investing strategies are available.  But the professionals never tell you about them?  I will.

Many of you can manage your own portfolios.

Investing can, and should be fun.  For many, it’s a hobby – but a serious hobby, not a game.  If you are willing to devote some time and a little effort, I can teach you basic skills that can be used to protect your stock market investments. That means more profits and fewer (and smaller) losses.

Stock option strategies allow you to limit, or even eliminate the chances of losing money. Options were invented as risk-reducing tools, and you can use them just that way.  But, they are not appropriate for every investor.  Many understand the basic concepts immediately, while others require more time.

I’ve been in the options business since 1977 and want to share what I have learned. In The Rookie’s Guide to Options, I explain in detail:

RookiesCover

  • How options work
  • What to consider when making a trade
  • What you have to gain and the risk required to earn that profit
  • How to find your comfort zone and live within it
  • How to limit losses
  • How to decide when a position should be adjusted to reduce risk
  • How to adjust (when necessary) and why it’s important
  • When to take profits and when to accept losses
  • The advantages of using certain index options
  • Six basic strategies, four of which are conservative, and two are more aggressive
  • The importance of managing risk and how to go about it
  • And more

The Rookie’s Guide to Options was carefully written for two audiences:

Investors who are new to options are offered all the information required to begin using options effectively. Quizzes allow you to measure what you have learned.

The experienced trader who wants a more complete understanding of the methods he/she is currently using. Plus suggestions for alternative strategies. Too many people use options without getting the full benefit, because their understanding of how options work is so limited.

Your investments are too valuable to hold without insurance. The events of 2008 ought to be proof enough.

Download a free, sampler version of the book
with a short excerpt from each chapter.

The Rookie's Guide presents ideas that probably never occurred to you. You’ll learn to use stock options conservatively, and decide if these methods are appropriate for you.  There’s no hype. No promises of instant wealth. No guarantee of success. But what is provided is a well-thought out guide for investors willing to learn how to earn money consistently and avoid future disasters. It’s clearly written, it’s detailed, and these methods are the only strategies I use for my personal trading. That’s how much I trust these methods.Isn’t it time to decide if you can benefit from using options?

Unsolicited Testimonials

“Well I have read your (Rookies) book and found that it was terrific!  It's by far the most practical information I have run across yet.  You really gave me the feel that I was watching you make trading decisions.” Bill F.

"I’ve already bought the Rookies Guide, and as with your previous books it’s fantastically informative, clearly written and is fast becoming my source of reference for all things option related. (I’m one of those people who like to understand things completely before starting to throw money at it)" GF

"I received the book and have been voraciously digesting it. Finally! A well done and thorough book covering what one must know to trade, and why. Kudos Kudos Kudos!!! No B.S. and hype to sift through. Just serious guidance. I am very thankful you wrote it." Don W.

"Fabulous" KE

167

3 Responses to Were You Hurt By The 2008 Stock Market Massacre?/>

  1. Mike S. 11/18/2008 at 8:24 AM #

    Hi Mark, thanks again for your informative blog. I have two questions I wonder if you could answer (these were passed onto me by others and asked that you respond):
    1) Say I own 500 shares of ABC Co. @ $10/share (cost basis=$5,000. I sell a call at a strike of $12.50. Say the stock is at $15/share on the expiration date and the shares are called away. Do I get paid the strike price x 500 shares ($6,250) or do I only get paid the difference from where the stock is minus the strike price ($1,250)?
    I’m not worried about the premium here. I just want to know what amount of cash will show up in my account on Monday. $6,250 or $1,250?
    2) Say I sell a one month call and the stock price exceeds the strike price two weeks prior to expiration. on expiration day, the stock has dropped back below the strike. I know the stock can be called at anytime but if the buyer has waited until expiration has he missed out on his chance or is a call based on the stock surpassing the strike at any point during the month? Seems like a dumb question but I’ve heard that most/nearly all options, if they are called, are called on expiration. I, personally, would call the stock once I’ve made a nice profit and not be greedy (if this is the case).

  2. Mark 11/18/2008 at 9:34 AM #

    Mike,
    I’d be pleased to reply. The major lesson to be learned from this question is that options are not made to be exercised. For individual investors, buying and selling is the focus – option owners should seldom exercise an option.
    This raises a question: are these questioners already trading, or are they first learning about options?
    1) The cost basis is 100% irrelevant.
    1) When you sell a call option, if assigned an exercise notice, you are obligated to sell 100 shares of stock – per option – at the strike price.
    Thus, you receive $6,250.
    Think about this for a minute. If the stock closed at $13.00, would you really enter into a contract where you might be forced to sell your shares at $0.50 per share? Surely not.
    2) True: The vast majority of options are exercised at expiration, and not earlier. Let me begin with a blanket statement: Except for the possibility of collecting a big dividend, it is a very (very, very, very) big mistake to exercise a call option before being required to do so – and that’s when expiration has arrived.
    Why would you want to own stock and pay the interest required to carry it? Why would you want to pay a fee to exercise your option? Why would you change a position in which all you can lose is the option premium to one in which you can now lose the entire value of the stock? And if you are planning to sell the stock immediately after exercising, why would you throw away the remaining time premium?
    You would never want to do any of those things.
    Even puts are seldom exercised early, but when they become very deep in the money there is a valid reason for early exercise (when put owner also owns stock, exercise eliminates the position and interest can be earned when both the stock and put are sold).
    ” I, personally, would call the stock once I’ve made a nice profit and not be greedy”
    This has nothing to do with greed. It has to do with understanding how options work and how to buy and sell them efficiently. If you have a ‘nice profit’ you can collect that profit by selling the call option. Repeat: SELL THE OPTION. DO NOT PASS GO. DO NOT COLLECT $200. DO NOT EXERCISE.
    I recently
    recently replied to a similar question. Take a look.
    Yes, if the buyer failed to sell the option when the stock was higher, a profitable opportunity was missed. But that happens all the time with stocks and options. Most people fail to sell anywhere near the top.

  3. stock investing guides 11/18/2008 at 6:14 PM #

    Great article. We must all become educated investors much more so then our parents were and start sooner.