There are 5 bullish strategies that can make you a lot of money in the stock market. These strategies all have the power to turn a small portfolio of only a few thousand into a large portfolio consisting of hundreds of thousands to millions in time. If you are already making money in the stock market these can help you out. What are they? Below is a list of 5 bullish strategies.
1. Buying a stock. This is the simplest way to make money in a bulls market. Say you like stock XYZ. It is trading at $40. You think it is worth more than that and decide to buy it. The stock moves up to $44. You sell it and have a 10% gain. Simple.
2. Buy a call. When you buy a call what you are actually doing is, buying the right to buy a stock at a certain price, before or after a given date. If we bought a $40 call on stock XYZ when it was at $40 we would have bought the right to buy the stock at $40. Say we paid $2 for this call. When it went up to $44 the call would be worth at least $4, because $44-$40=$4. We would have walked away with at least a 100% return. While buying a call can give you huge returns it can also give you huge risks. If the stock went down to $38 you may have lost your entire investment.
3. Sell a covered call. For every seller there has to be a buyer What if you bought the stock at $40 and sold that $45 call for $1. What would have happened? Well you would have walked away with an initial $1. And you would have made the $4 from the stock. The downside to this is if the stock went higher than $45 you would have to sell it at $45. You would have lost potential profit.
4. Bull call spread. What if you sold the $40 call for $2 and bought the $35 for $6. Initially you would have lost $4. But what happens if the stock stays above $40 by the time the options expire? You would have had to sell it at $40, but could have bought it at $35. You would have made $5(what you made) - $4(what you spent) = $1 profit. This is a 25% return not bad. You just need the stock to stay at $40 or higher.
5. Sell a put. A put is the opposite of a call. When you buy a put you buy the right to sell a stock at a certain price by expiration. So what if you sold the $35 put for $2. You have the obligation to buy this stock at $35. You take home $2 for this obligation. So now all you want this stock to do is to stay above $35 by expiration. Even if it comes down to $35.01 you make money. The down side to this is even though you have a high probability of success your risk is high. If this stock comes down to $20 you have to buy this $20 stock for $35.
If you are more long-term oriented buying a stock for a little more than it is worth should not bother you as much. For this reason you should not sell a put on a stock you would not like to own.
For more information on how to make money in the stock market visit http://www.stocks-simplified.com
When I was young I wanted to learn how to trade the stock market. So I traveled around the country listening to professional traders talk about how they are making money in the market. Now I understand how easy it is to make money in the stock market and started a site http://www.stocks-simplified.com to help others learn.