I recall reading in the past where only seventeen surgical operations covered the vast majority of surgeries performed on people.

And I think you could say something like that with options trades.  While there is virtually an infinite number of ways to put options trades on, there is some much smaller number of plays that cover the majority of options trades that people put on.

I don’t know what that number is, but I would bet it is seventeen or less.  And in this post I’ll tell you what four of my favorite option plays are.  Sure, I have others, but what is good about them is they are pretty easy to understand and Read the rest of this entry »

One of my favorite stock options trades to do is called a straddle – or a related trade called a strangle

When we do a straddle we are buying a call AND a put on the same stock at the same strike price.  In other words, we aren’t choosing if the stock will go up or down, we are choosing both directions.  We are straddling the fence, so to speak.

So if the stock goes up, our call makes money but our put loses money.  If the stock goes down our put makes money but our call loses money.

When you net this out it sounds like we will never make money, right?  So why would we do a crazy thing like this?

Because if the stock moves Read the rest of this entry »

Bonds have their place in an investment portfolio when market conditions are right. However, even in the right market conditions, many people have a misconception about bonds that is not good for their financial health.

Let’s look at what that is.

A bond is simply you loaning money to a corporation for a certain period of time, so they will pay you interest. For example, you might buy a ten year bond for $1000 that pays 5% interest.  When you buy the bond, you have loaned that money to the corporation.

Many people mistakenly believe that they can’t lose the original $1000 bond investment they made.  That is the misconception.  It is ONLY TRUE if you Read the rest of this entry »

I did a fun investment thing this weekend.  I turned my pocket change into .999 pure silver.  I always get a kick out of that.

Because the “hold in your hand” silver is beautiful to look at.  And because I know I am beating inflation when I do this.

Every night when I come home from work I put my pocket change in an old Folgers coffee can.  I don’t think the brand of coffee is significant.  Let’s just say I am a man with his own traditions.

But what is important is that the amount of money in the can builds up over time.  So after about four or five months, the can fills up.  Then I take the can to the grocery store and empty it into one of those change machines you see.

The machine counts the change and gives me a receipt.  I take the receipt to the service desk and they give me cash.  This trip they gave me $119.  Nice.

Then I take the cash to my local coin dealer and buy one ounce .999 pure silver rounds with it.  Since silver rounds were going for about $35 an ounce this weekend, I came home with three ounces of pure silver.

Had I kept the change, it would have continued to lose purchasing power.  Do you know that the dollar has lost over 40% of its purchasing power since Read the rest of this entry »

Regardless of all the bleak news we hear every evening, we are living, at this very moment, at the beginning of an incredible opportunity in the stock market.  There is a huge, world-shaking, game-changing event beginning right now as I speak. It is already underway.  And most people have not picked up on it yet.

And there is a ton of money to be made from it—in stocks.  I’m talking J. Paul Getty-like opportunities, Rockefeller opportunities, like when the railroads started crossing America opportunities — like we can turn back the calendar.

I’m going to ask you a question — and then tell you the answer — which you may find hard to believe.   But there is every indication, right now, today, that my incredulous answer is going to come true.

Here’s the question.

What country will probably become the biggest oil producer in the world, bigger than Saudi Arabia, within five years?

Here’s the answer.

The Read the rest of this entry »

For those of you who don’t live in Florida, you might find this a bit unusual.  Actually, as a Mid-West guy from the Heartland of America (St. Louis), I’m still getting used to it.

I stepped out of the office about 2:30 PM today to stretch my legs, and there, not 25 feet from me was an alligator, out of the lake, on the lawn, getting a suntan.

So that cleared my mind a bit, which is what work breaks are supposed to do – right?

Later, a nice lady at the office told me the alligator’s name is Read the rest of this entry »

As we’ve said often before, both amateurs and professionals make mistakes.  But professionals limit the damage and keep from wiping themselves out.

Here’s an important technique professionals use to minimize their stock losses.  It’s called trailing stop losses, and it’s a technique I use (I even have it automated).

So here’s the thing.  Instead of just deciding we will sell our stock if it goes down 25% from where we bought it, we are going to do something smarter than that.

Whenever the stock goes up higher, we are going to say we will sell it if it Read the rest of this entry »

For at least a year now, many financial newsletters I’ve read have been recommending investing in Microsoft.  Microsoft is one of those companies that is just positively gushing billions of dollars of cash per year.  And they recently started paying dividends.

The newsletter writers were saying this was a great buy and hold stock, which will consistently increase its dividends.  I thought they were right then, and I definitely think they are right now.

But I just couldn’t get excited about it.  The stock had been languishing around $20 a share forever.  It was yawn wide boring.  And I had Read the rest of this entry »

Let’s face it.  Both professional and amateur investors will lose money on a stock from time to time.  This can happen when a sudden bad news event surfaces about the company you are invested in.

Like the recent Walmart Mexico scandal.

It seems that people high up in the Walmart organization knew that bribes were being made to officials in Mexico to cut through the red tape to open new stores.  This has put their competitors at a disadvantage.

And Walmart stock dropped suddenly on the news.  Or a few years back when the Enron scandal broke.  In that case the price of the stock ultimately dropped more than 90% — much more than 90%, actually.  That’s a devastating loss.

Bt the difference is the professionals keep from turning a small loss into a big loss.  They live top play another day.

And the way they limit their losses is with a technique called Read the rest of this entry »

The past three months have been a frustrating time for stock market investors.  After making a major move up from August through February, and even March, the stock market seems stuck in a trading range.

Which way will it go?

The prognostications on this question are a bit maddening.  Many feel the market will make a major move on up, citing that companies are still cheap relative to their earnings.

Others say with equal conviction that the market is setting up for a significant correction.  I just read one analyst’s comment that all of his charts are lining up like he has never seen before – like some earth shaking event, driven by hidden forces, is about to happen.

Even Walmart, that bastion of capitalism and stable stocks, took a Read the rest of this entry »