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AMERICAN STOCK OPTIONS INSTITUTE THE EDUCATIONAL DIVISION OF THE CHICAGO BOARD OPTIONS EXCHANGE

Some type of investment are widely recognized and understood by most people. This is because there is a general acceptance or sense of  legitimacy about them. The American stock market and real estate, for example, are well understood by just about every-even to a point that very real risks might be ignored or overlooked in some instances. Or, if these forms of investing are not truly familiar, there may at least be a belief that they are known, and that risks are small.
Understanding makes it much easier for new investors to enter specific markets. Real estate is known for its historical appreciation and safety. And the stock market is the most popular  way to invest, either through direct ownership of shares or through  purchases of shares in mutual funds.
Those markets are popular because they are understood by the investing public. An by the same argument, an investment that is not well understood creates a problem in the mind of the investor. It may be thought of as too risky, requiring too much capital or too exotic for mainstream tastes and preferences. Along with the lack of comfort, risks may be overestimated or exaggerated in some instances.
The options market is widely misunderstood in this way. Lack of understanding creates fear. What do you think about when the word option is spoken? Some equate options with complexity and risk, and reject this alternative as being appropriate only for speculator. But that is not necessarily true. Options may be highly speculative or highly conservative, depending on the specific strategies employed. In some cases, options can be used to hedge a position or to provide protection against loss. You will be able to overcome the apprehension of a new idea by gaining knowledge about it and then making an informed judgment.
If, upon gaining information, you decide that options are not right for you, at least that is an informed judgment. On the other hand, a rejection of any form of investment without first gaining a preliminary understanding of how it works would exclude the possibility that it might be beneficial to you.
THE EDUCATIONAL DIVISON-AMERICAN STOCK OPTION INSTITUTE offers you the best stock option studying material in the world to investigate the profession and once you gain knowledge leads you to successful options trading.
Options first began trading publicly in 1973  Unlike the stock market, this is relatively short term performance history, so it is difficult to compare options with longer term institutions We cannot see how option investors or speculators might have fared in the stock market crash of 1929, or how they might have come through the bull market of the 1950s. If your parents have owned stocks over many years, chances are that their experiences have influenced your attitudes about the market. It is less likely that your parents have had many years experience buying and selling options.
Options today serve a number of different purposes. This study is concerned with strategic uses of stock options that are traded publicly, either for speculation or for one of number of other uses.
On the most speculative side, options are pure risks and gambles on a stock’s movement. On the other end of the spectrum, options are employed to insure against losses by hedging risk positions. There are a range of possible strategies in between these extremes. To decide how you can profit in the options market- or if options are even appropriate in your case-you need to go through a four step process of evaluation.

  1. Master the terminology of this highly specialized and complex market. The language of options may be foreign to even the seasoned stock market investor or expert-because so many ideas not common to stocks are constantly at work in the options market.
  2. Identify and recognize the risk profile associated with each type of option investment. Many different investors and speculators use a broad range of strategies involving options. As you might imagine, that also means that the range of risk is broad. You will need to determine whether you belong in the conservative camp or the speculative camp before deciding whether to use options in a particular manner.
  3. Observe the market. Watch how option values change in reaction to the broader markets. What factors besides stock prices influence the value of options? When does time work for you and when does it work against you? Once you appreciate the benefits, consequences, and risks of each strategy, you can proceed with confidence.
  4. Set a standard for yourself. This is most critical for any form of investing. Without a goal, how can you know when to buy or sell, why you are investing, or even whether a product or strategy has a place in your portfolio? Everything defined by your strategy will define how you make decisions as an investor and, ultimately, whether you succeed or fail.

You can apply this four-part process to all forms of investing, regardless of the market. Even buying shares of stock requires the same steps. Successful investing depends on first gaining knowledge, then identifying risks, tracking the market, and setting your own standards for risk and safety.
You have a tremendous advantage over the option investor and speculator of the mid-1970s. Today relatively inexpensive computer programs give you affordable on-line access to the trading floor of the stock exchange. If you don’t have a computer, your broker certainly has up-to-the-minute access during the trading day, and many brokerage firms allow you to place orders 24 hours a day.
In the not so distant past, all forms of stock market investment were relatively remote. Investors had to depend on brokers; on especially busy days, your call might not even got through. Brokers had to depend on technology that was not as well developed as today’s.
They also traded in a new territory, the options market, that was understood by only a small minority of individuals. Today, the market is growing in popularity and in application. You are not alone.
Your broker should be completely versed in options if you are seeking advice. And if you use a discount broker you should know exactly what you are doing. Even if you work directly with a full-commission broker, you should still have the knowledge to intelligently manage your options strategy and portfolio. A broker advice may be sound, but you should be willing to take responsibility for your decision in this market.
This course is designed as an introduction to the options market. It does not recommend that everyone should become a player of the game, or that options are always right or best for everyone. The following explain the terminology and various strategies you can employ in this market; ultimately, you need to decide whether options can enhance your portfolio’s profit.
Each section includes step-by-step, complete explanations of terminology, accompanied by examples of how those words and phrases affect you as an options investor. The various strategies for conservative and speculative investing are then explained in depth through the use of case histories, examples, illustrations, and identification of different risk profiles.
In many instances, the discussion includes cost, sales price, and profit but excludes mention of a brokerage commission. In reality, you will pay a commission each and every time you buy or sell, in the same way you are charged a fee for buying or selling stocks.  But because the amount varies greatly from one broker to another, the details of brokerage commission or transaction fee are excluded. When you begin to calculating your own profit level or breakeven point, be sure to include an allowance for fee and expenses on both sides of the transaction.
In order for any strategy to work, it must be appropriate and comfortable for you. No one idea can work for all investors, and options are no exceptions to this rule. No matter how practical or foolproof and idea sounds in theory, it should be both profitable and enjoyable for you. Too many would be make their decision on the advice of others without first investigating on their own. They forget the importance of research, comparison, and analysis, actions to be taken in your own best interest.
You will have the best chances for success by first gathering all the facts needed to draw an intelligent conclusion. More profit is not worth the effort when it comes at the expense of your own peace of mind and satisfaction. Real success in the market is a combination of personal accomplishment and financial gain. This internet course’s purpose is to give you  the professional information needed to evaluate options and their possible application in your investment portfolio. By applying the information to your own situation, you will have mastered one of many possible avenues to becoming a successful and knowledgeable investor.

Competitive Advantage

Options are derivative instruments. This means that an option’s value and its trading characteristics are tied to the asset that underlies the option. It is this essential defining characteristic that makes options valuable to the knowledgeable investor. A major advantage of options is their versatility. They can be used in accordance with a wide variety of investment strategies. As a result, any investor  who understands when and how to use options in pursuit of his or her individual financial objectives can enjoy a clear advantage over other investors. The investor will have an effective means of managing the risk inherent in any investment program.  In most investment situations, understanding options gives the investor a wider range of investment choices.
The asset on which the option is traded might be stock, an equity index, a future contract, a Treasury security, or another type of security.

However bear equity and real estate markets disappoint the public because they have suffered major losses.  Nevertheless there are major signals for the beginning of a bear or bull markets. When option traders perceived these signals then was said to be big many ahead.
            The lack of understanding about the option markets creates fear. Options may be highly speculative or highly conservative and moderately aggressive. Having combined techniques applied, giving the advantage to secure substantial profit. This is such an investment in which the net profit could continuously exceed the annual rate of return of one-five hundred percent, that you will learn through the study course.

Role of  the U.S. Stock and Derivative Market in Building Capital

Capital can be increased in many ways. For example, you can use capital to start up a business or buying one (physical asset markets).  The risks are extremely high because there is always competition in any industry. It is more safe to invest into the real estate market however profit margin is very limited comparing to the stock market.
In the U.S economy most companies are publicly traded whether they are on Stock Exchanges or Over -the-Counter-Market.  Stocks and derivatives are one of the best methods of creating capital gains. They are liquid and under normal circumstances, buying and selling them takes only a few minutes, on via personal computer. Time is money! Therefore the length of time, liquidity and experience results in compounded capital gain.

Principles Followed by Successful Investors

Many naïve investors believe they are going to make a killing in the stock market because they have brilliant idea that is in theory. One of the first rule to learn as a stock and derivative investor is to avoid becoming a casualty.  Presently and in the past as well we have to consider the international market’s indexes especially in Asia as the Chinese stock market is growing with fast space. Their activity has to be translated for the USA capital market. The American Stock market is still the largest in the world and primarily its economy and financial regularities has to be considered.

Principle of  Diversification

This is one of my golden rule to reduce exposure to risk. The other one is to utilize combination techniques.  The third one is to know  whether from what market direction the capital is flowing in and out. Nevertheless without stock analysis stock option trading becomes a lottery.

Competitive Analysis

Summary of Major Market Instruments, Market Participants and Security Characteristics
Quoted interest rate = k = k* + IP + DRP+ LP + MRP

K = the quoted, or nominal, rate of interest on a given security. There are many different  securities, hence many different quoted interest rates
K* = the real risk-free rate of interest (k* is pronounced “k star)
IP = inflation premium
DRP = default free premium
LP = liquidity, or marketability , premium
MRP = maturity risk premium

 

Instrument Market Major
Participants
Riskiness Maturity

Interest Rate
on 1/13/95

U.S. Treasury bills Money Sold to institutional investors by U.S.
Treasury to finance federal expend
Default-free 91 days to 1yr. 6.4%
Banker’s acceptance Money Firm’s promise to pay, guaranteed by bank Low  degree of risk if guaranteed a strong bank Up to 180 days 6.3%
Commercial paper Money Issued by financially secure firms to large investors Low  default risk Up to 270 days 6.2%
Negotiable certificates of deposit (CDs) Money Issued by major money-center commercial  banks to large investors Riskier  than Treasury bills Up to 1 yr. 6.5%
Money market mutual funds Money Invest in Treasury bills, CDs, and commercial paper; held by individuals and  businesses Low  degree of risk No specific  5.5%
Eurodollar market time deposit Money Issued by banks outside  U. S. Default risk is a function of issuing  bank Up to 1 yr. 6.3%
Consumer credit loans Money Issued by banks /credit unions/ finance companies to individuals Risk is variable Variable Variable
10-15%
 U.S. Treasury notes and bonds Capital Issued by U. S. government No default risk, but  price can decline if interest rates rises 1-30 years 7.8%
Mortgages Capital Borrowings from commercial banks and S&L by individuals and businesses Risk is variable Up to 30 yr. 9.1%
State  and local government bonds Capital Issued by state and local governments to individuals and institutional  investors Riskier than U.S. government securities, but exempt from most taxes Up to 30 yr. 6.6%
Corporate bonds Capital Issued by corporations  to individuals and institutional investors Riskier than U.S. government securities Up to 40 years 8.5%
Leases Capital Similar to dept. in that firms can lease assets rather than borrow and then buy the assets Risk similar to corporate bonds Generally 3 to 20 years Similar to bond yields
Preferred stocks Capital Issued by corporations to individuals and institutional investors Riskier than corporate bonds but less risky than common stock Unlimited 3-5%
Common stocks Capital Issued by corporations to individuals and institutional investors Risky Unlimited 2.5-15%
Stock option Capital Issued by corporations on the secondary market to individuals and institutional investors Risky and can be riskless Limited and unlimited See note

Notes
It is surprising to many option traders, is that  rising interest rates cause call prices to rise and put prices to decline. A call option buyer is entitled to dividends.
Common Stocks are expected to provide a profit in the form of dividends and capital gains rather than interest. It is essential to compare different  financial markets and financial instruments by their track records since they exists.

Learn stock options from the beginning to professional level on this online seminar which is the key to success.

  • Chapter 1. Calls and Puts
  • Chapter 2. Opening, Closing, and Tracking the Option
  • Chapter 3. Buying Calls
  • Chapter 4. Buying Puts
  • Chapter 5. Selling Calls
  • Chapter 6. Choosing the Right Stock
  • Chapter 7. Selling Puts
  • Chapter 8. Combined Techniques
  • Chapter 9. Choosing Your Own Strategy