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One of the core questions my coaching clients have asked me over the past few months is: “Can I still make money in stocks with the market down like its been?” The answer is yes, or no, depending on the type of investments you have.

If you hold stocks, stock mutual funds, or your investment is in the standard asset allocation accounts the answer is probably no. The reason for this is that these large accounts are regulated and do not allow short stock positions. Therefore, if the market declines in the next 3-5 years, as it most likely will, your account will lose money year after year.

Short positions, however, will allow you to make money whether or not the market goes down. But you can only take advantage of short positions if you trade through an individual account.

If you trade through your individual account rather than a fund, it is possible to for you to take charge of your own investment and make money in the stock market almost every day. This is because regardless of the direction a stock is moving, you can make money, by buying if you expect it to go up, or selling short if you expect it to go down.

If it’s that easy, why isn’t everyone doing it? For one thing, it requires approximately $25,000 to set up an individual account. Some people don’t have the funds, or are reluctant to risk it in an individual account. And, it is true that stock trading for a novice can be very challenging. If you do not know what you are doing, you can lose all your money very quickly.

There are tactics to alleviate these two concerns of the novice trader.

First, find a trading program that gives you low risk trade picks. The program I use and that I recommend to my coaching clients has a 31 year average experience level for its trade pickers. This means that you can just follow their suggestions and are fairly assured that you will make a profit. And, if you also set your stops at a low risk level, your loss over time will be small.

Secondly, it’s important to find a program that walks you through every step to success. To illustrate, I teach a nine day course where my students are taught each and every step needed to successfully trade stocks on their own, no matter if the market is up or down.

Regardless of the system you choose, if you make sure that it has experienced advisors and a program that walks you through every step of the way, you can be smiling all the way to the bank while everyone around you is moaning about the poor performing stock market.

To read about other lessons I learned in my fifteen years as a day trader and coach, as well as tips and techniques for becoming successful at stock trading, even in a bad economy, read my free report “From Video Junkie to Day Trader,” and learn more about how you could be trading stocks profitably in as little as two weeks.

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There are a lot of wrong ideas buzzing around about the field of stock trading that arouse new trader’s doubts and keep others from pursuing the field at all. As a successful trader for over 15 years, I prefer to take a more positive approach and deal with the prevailing truths that exist in the field of stock trading.  Here are just a few. 

1.  You will be successful at stock trading if you can keep your trades consistently low risk over time. Sure, you might miss out on some of those too good to be true, windfall trades that all the movies are centered around.However, I have discovered that searching for that godsend trade does nothing but result in a horrendous loss that can completely demolish the portfolio you have been working so hard to build.Better to stay lower risk with steady profits over time if you are looking to make stock trading more than a hobby.

2.  You don’t have to spend all day trading to be extremely successful.It does not have to be a nine to five job.Now, don’t misunderstand.I’m not implying that stock trading is another make money while you sleep angle.  It takes time and effort to learn the systems needed to achieve success at stock trading. But, by using GAP trading capably, I trade for two to four hours per day, plus one more hour of prep time.And, I earn a great living.You can too, if you can find the right process to do so. 

3.advantage of the experiences and knowledge of other successful traders can quicken your accomplishments a great deal.  Don’t start from scratch because it will take you 10 or more years and a lot of money to make all the mistakes others have already made.It is just resourceful business sense to build on the knowledge of others.Don’t reinvent the wheel?  Instead, read books by successful traders, take classes, find mentors, and use the wisdom of others to make your road more pleasurable and secure. 

Stock trading is often portrayed as mysterious and hard for “regular guys” to understand.Take it from a regular guy, that idea is not correct.  With the right systems in place and a working knowledge of the basic truths of stock trading, anyone can be successful. 

To read about other lessons I learned in my fifteen years as a day trader and coach, as well as tips and techniques for becoming successful at stock trading, read my free report “From Video Junkie to Day Trader,” and learn more about how you could be trading stocks profitably in as little as two weeks. 

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An at-the-money option has both advantages and disadvantages over stock and in-the-money options. First, the at-the-money option will be cheaper then both the stock and the in-the-money option. So there is less capital requirement and less total risk.

Remember, when purchasing an option, you can only lose what you initially invested. The problem is the amount of extrinsic in the at-the-money option.

In order for you to profit from buying an at-the-money option, you need the stock to make a move very quickly. Because you have so much extrinsic value, you will be battling against the option’s daily rate of decay.

So, the movement of the stock must happen quickly enough and large enough to offset the amount of money you will be losing daily as expiration draws near.

With this said, the best chance you have to make money when buying a naked at-the-money option is to use it as a short term trade. The more time you hold onto this option, the more difficult it is for you to be successful due to the options decaying extrinsic value.

For chart below, stock price= $35.00

Strike Price     Option Price    Delta     Breakeven     Extrinsic Value

$30.00             $5.20            85        35.20             $ .20

$35.                   $1.00               52         36.00               $ 1.00

$40.00             $ .30             20        40.30             $ .30

An out-of-the-money option presents many of the same advantage & disadvantage parameters to the investor. The out-of-the-money option is even cheaper then the at-the-money option which means more leverage and less risk.

On the other hand, with a lower delta number, the stock needs to move much more than either the in or at-the-money options in order for the options to be successful. Again, we need the option’s delta to outpace the option’s rate of decay.

Now, with the out-of-the-money option, there is less extrinsic value than the at-the-money option so the amount of total possible decay (cost of the option) and the rate of this decay is less than the at-the-money option.

By being further out-of-the-money, this option needs more movement from the stock. As a naked option, this out-or-the-money example is extremely speculative and should only be used naked when the investor feels there is a very good chance of a stock having a large percentage move.

A trader must know that the odds of them profiting when buying a naked out-of-the-money option is extremely slim. When buying a naked out-of-the-money option, be comfortable with the possibility of losing all your money.

For the chart below, the stock price equals $35.00

Strike Price     Option Price     Delta     Breakeven     Extrinsic Value

$30.00             5.20                 85         35.20             $ .20

$35.00             1.00                 52         36.00             $1.00

$40.00             .30                  20         40.30             $ .30

Although options can be traded by themselves for directional plays, and can perform well under the right conditions, they are much better used in coordination with stock or other options in formatted strategies which will be discussed in the next section.

While buying naked calls and puts can provide some of the biggest leverage and highest returns, they can also involve the most risk. This strategy should only be used by experienced options traders or traders using risk capital.

Click Here To Obtain Free Money Making Reports And Other Free Reports Covering Options Trading Strategies

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