Here are two strategies for higher consistent returns and less risk. These are also opportunities for index beating returns. And high absolute returns which can reach 30% and above if you use margin and have or gain experience.

You can have high absolute returns with a lot of stability by buying bond and stock closed end funds with discount.

Closed end fund is like mutual fund. The difference is that closed end fund have limited number of shares. And they can sell for less or more than sum of underlying securities. Buy fixed income closed end funds with discount. You can go to etfconnect.com and search by discount. The more advanced strategy is to frequently trade the closed end funds and hedge them with options on Treasuries ETFs. This government bond exchange traded funds have ticker symbols TLT, IEF and SHY. Frequent trading can capture short-term fluctuations and significantly improve overall results. If you trade, you might pay attention to shorter duration funds – not just to discount. Closed end funds with average maturates up to 5 years are more predictable from my experience and therefore easier to trade.

Second opportunity is about selling stock puts. You act as mini insurance company by selling insurance (puts) that stock will not be 20-30% lower 0.5 – 2.5 years from the initial transaction. Select the put expiration date as far as possible. Stocks with LEAPS – options expiring up to 2.5 years in the future are preferable.

Approach picking stocks for selling puts like you buy a business or invest for very long term. I consider this strategy as investing – not trading. At least from underlying stock selection perspective. Pick companies you, independent financial publications and/or trusted advisors made a lot of research. Look for cash, real estate on balance sheet. Very important is long-term predictable growth (growth even better then hypergrowth, because it is hard to predict when hypergrowth phase stops). One of the most important factors is management. Best picks may and should include companies run or owned by best managers or money managers. I mean Sears Holdings (SHLD) which is run by billionaire hedge fund manager Eddie Lampert. Eddie Lampert is one of the best and highly respected money mangers in USA. Some people call him modern Warren Buffett. He took about 5 managerial responsibilities at Sears Holdings. And besides being one of the very best money managers he is famous for successful retail turnaround stories.

Second example for stock selection is Hewlett Packard with Mark Hurd as CEO. Look at the outstanding job Mark Hurd did at his previous company – NCR Corp.

Of course one of the most important things is to buy companies with good valuation. Don’t chase good stories, good products, good prospects and even brilliant managers without regard for stock valuation.

With experience you can add turnaround stories to you portfolio, but make sure to thoroughly researching this opportunities. You can sell much more expensive insurance (expensive puts) in this situations.

By employing this two strategies outlined above you can create balanced portfolio with exposure to stocks and fixed income. Both strategies results to buying securities with discount. With selling puts you also have benefit of leverage because you need to put up in margin 10%-20% of underlying securities.

I feel that both strategies might be part of any size portfolio and might be suitable for investors with lower than average risk tolerance.

Properly executed, these strategies have the advantage of minimal expenses – something everyone can appreciate during these troubled times. The following example will demonstrate how this is done.

Technical Tip: The seller of a Put Option is obligating himself to buy the stock at the striking price. For assuming this obligation, he receives the Put Option premium. For the more technical readers we have provided an in-depth article link at the bottom of this article.

On August 21, 2009, the day your August Put Option expires, two scenarios are possible: Either the stock price is greater than or equal to $50, or it is less than $50. Let’s evaluate both scenarios.

Scenario 1: The stock trades at $50 or above: in this case the Put Option will expire worthless and you get to keep the $400 that you received earlier. You can now repeat the strategy month after month. When carefully executed, you would have earned around $7,200 in 18 months without ever paying a dime and without even owning the stock.

Let’s assume the share price for the stock has gone up 41% to $72 over the course of those 18 months. If you now purchase the 100 shares of XYZ Corp., the cost of ownership to you is ZERO, as you would have offset the $7,200 required for that purchase by your strategy earnings. You are now the proud owner of 100 shares XYZ Corp. at no cost to you.

Scenario 2: The stock trades below $50, say at $48 (a drop of 11% from $54). In this case the August Put Options will be In-The-Money (ITM) and now you need to buy 100 shares of XYZ Corp. at the strike price of $50. But here is the best part: You get to keep the $400 that you earned earlier selling the Put Option. Your effective cost for this trade is $4,600 after adjusting for $400.

Compare this with someone who bought 100 shares at $54. Share traders ended up with a loss of $600 while you had a modest profit of $200 instead. Well not as good as Scenario 1, but not bad either!

The strategy acts like a low-cost replacement for actual stock ownership, BUT you must be prepared to take ownership of the shares under Scenario 2 circumstances. Keep in mind that this is a long-term strategy.

There are many different ways to construct these strategies – conservatively or aggressively. Just like regular investing, different people have different levels of risk tolerance. If you want higher profits, you’ll have to be willing to take higher risks.

At TradeGreeks we avoid high risks that MIGHT hit the big jackpot. Our focus is on conservative strategies with medium to long-term consistent, predictable returns. This will ensure great profits that beat anything else you might try in this market – sometimes well over 100% per annum. What’s even more important: Our strategies ensure peace of mind!

This is an article from the TradeGreeks’ “Tactical Series”

More in-depth explanations of this strategy can be found in our article “Uncovered Put Writing – Insider’s Guide”. We invite you to visit http://www.tradegreeks.com/ and register for free no obligation membership. This will allow you access to the article and many other educational resources regarding trading of Options.

Another reason for the demand to have a good stock trading system in place is the rise in global stock markets. As a matter of fact, traders/brokers as well as investors/shareholders are finding that the task of trading in equities or shares or stocks is proving to be extremely complicated, considering that newer companies and institutions are being launched all the time. And the Internet has not helped by bringing the world closer to home!

What are the features of a stock trading system?

(1) What is meant by a stock trading system? It is a tool to enhance the success of investments, especially if it works effectively and efficiently. It includes strategies related to investments, market guides and trading schemes.

There are experienced analysts and professionals to guide the trader or investor as needed. This is achieved by providing a constant flow of information and analysis regarding market trends and movements in the stock market arena. Without this in place, it would be difficult for smooth functioning of the stock market.

Lastly, there is a timing system included in the package. Thus, every investor is aware of the time limits for investing in a particular stock.

(2) A stock trading system is not something that can be just bought at any marketplace! There are special individual distributors or operators available–they can be found locally too. These dealers offer a customer much more than just a system. They are truly worth it because they can lessen your headaches! All the more better to go to them if you have linked up with other business partners.

(3) Another option is to check out those special companies offering to sell systems that are dependable and have already been well promoted.

(4) Traditional or conventional methods of transactions are giving way to more modern methods. So there is the automatic/electronic stock trading system which is faster and more interactive in nature.

Since trading in stocks has become a global activity, it is difficult for investors to be present physically at all locations. He/she need not attend auction venues or trading places for the express purpose of buying or selling shares or trading stocks. Hence, the launch of electronic transactions.

This sort of a stock trading system is quick and convenient since it is supported by wireless Internet and wireless telephone. More advanced technology is sure to evolve in future.

To illustrate the concepts, let’s go on a shopping trip.

You’ve been thinking about buying a MacBook Air, Apple’s thinnest laptop, for a few days and you’ve done some research to find the best deal. You head for the mall on Saturday and spend most of the day trying to find the lowest price. This turns out to be $1799 for a 2.13 GHz MacBook Air.

Suddenly you realize that you have a dinner guest coming this evening and need to get groceries. Fortunately, the nearest store is right in the mall. Unfortunately, you discover that you forgot to bring your credit card and need to pay cash for the groceries. This leaves you with $150 plus some change.

On the way to your car you discover another electronics store, and to your amazement, the 2.13 GHz MacBook Air is advertised at $1499. Not believing your eyes, you go in and the store manager confirms the price but says that they have only one unit left. How are you going to nail down that price without sufficient cash and without a credit card?

You ask the store manager if he will hold the unit for you in return for $100, and that you will return in two hours to purchase at $1499. If you are not back in two hours, the store manager can sell it to someone else.

You make a written agreement, signed by both parties, that the unit cannot be sold to anyone else for next 2 hours but only to you at $1499 in exchange for $100, and that the $100 is forfeit if you do not return within 2 hours.

You have just engaged in “Options trading” The following options trading terminology should now make a lot more sense to you.

Options Contract – is what the note is called that you and the store manager just signed.

Underlying (underlying stock/share) – is the MacBook Air 2.13 GHz that you have agreed to pay ($1499).

Strike Price – is the agreed upon purchase price (in this example $1499).

Call Option – the type of contract in this example is a “Call Option.” It gives you the RIGHT but not the OBLIGATION to buy the MacBook Air. In order to exercise the “right to buy” you must return within 2 hours, and the store manager must sell it to you at $1499. If you change your mind, you do “not have an obligation” to buy. You simply don’t return and lose your $100 hold money.

Option Expiry – for this example the expiry is 2 hours, meaning that the option contract will cease to exist after 2 hours.

Option Premium – this is the $100 hold money you paid. It’s the cost to enter into this contract. This is not a deposit against the purchase price, but money the store will keep either way for providing you with the convenience. So, your effective purchase price will be $1599, which is still better than the $1799 “best deal” you had identified earlier, and it is the reason you entered into the contract.

Long Call and Short Call – for this example you have the “Long Call” since you are buying the contract for $100, and the store manager has the “Short Call” since he is selling the contract and gets to keep the $100.

Now let’s evaluate the risk exposure for both parties to the contract:

Your risk is limited to the $100 hold money you paid, i.e., a Long Call Option buyer’s risk exposure is limited to the premium paid. If, hypothetically, the price for the MacBook Air tumbles to $1000, then there is no way you would return and purchase it for $1499! If, hypothetically, the price shoots up to $2599 within the 2 hours, then your immediate profit would be $1000.

The store manager, on the other hand, has unlimited risk and limited profit potential. A Short Call Option seller’s risk exposure is unlimited while the profit potential is limited to the premium received. Yes, he gets to keep the $100 in case of a price drop where the buyer is not returning to purchase, but if the price for the MacBook Air shoots up to $2599 within the 2 hours, he stands to lose a lot of money because he cannot sell it to someone else for the revised price.

Hopefully, this will have taken some of the mystery out of options trading and its lingo. As illustrated by our example, we are engaged in these types of transactions in some form or other in our daily lives. We’re just not aware of it. As you gain knowledge and practice, it will come to you quite naturally.

At TradeGreeks we focus on educating investors in the world of options, where profit potential is unlimited and is not restricted to a bull market. We have created options trading strategies that are so strong and so predictable, that we can solidly stand behind an unprecedented guarantee: You will get the return we promise, or your money is refunded with no questions asked.

Visit us at http://www.tradegreeks.com for more options trading articles and register for a free membership.

This was an article from our series ‘Covert Life of Investment’.

If you talk about financial matters, everyone knows the importance of money. To meet your needs and demands, financial backup is a must. Even if you are earning a handsome salary, you might not be able to save some part of it. Therefore, investment is must in order to build financial backup. However, if you talk about investment, the most reliable option you can have today is online trading. And this could only be possible with the invention of the Internet.

However, stock trading is not as easy as it seems. Planning in must for such kind of investment and involves the strategies that are practiced in order to mitigate the volatile nature of the market. Trading strategies are important and therefore a comprehensive marketing analysis is must. The analysis part is very important, and with the advancement of the technology, the analysis process has become easier than ever before. There are advanced analysis tools available online – simply feed some required data and find the analysis results in no time.

In addition, there are various stocks related terms that are often used in the trading process. It is therefore, important for all investors to learn all the terms and the different aspects of trading. First of all, investors need to educate themselves and then learn the market and the processes that are involved in Internet based stock trading. There are several things like charts, and stock quotes that are very essential to learn. Once you learn all these fundaments – trading would definitely be simple and hassle free.

For first time investors, it is important for them to find the answers to their innumerable questions. Some investors might ask: do I need an online account, how to buy and sell stocks, how to choose the stock company website, who can help them in case they have some doubts to clear? There are several other related questions that might strike in one’s mind. And you can find all the answers on the web. And in any case, you don’t – you can consult with online financial experts.

So, educate yourself, clear all your doubts and then invest your hard earned money in stocks. Those who are successful in the stock market are those who always take things positively. Therefore, whether you are a new or an experienced trader – you need to have that positive attitude towards the volatile market. Moreover, if you have done all the ground works before trading stocks – you are bound to make substantial profits from your trading. So, invest your money and enjoy your life in a better way without thinking about financial constraints.

The fact is, options trading is a risky business! There is always the chance that your options will expire worthless, losing all of your investment. But, at least when you are buying options as opposed to selling, your potential loss is limited - so you can control the amount you might lose.

In what way is it risky business? Stock options trading is risky because you could lose all your money on any stock options trade if the stock eventually closes with the options out of the money during expiration! Yes, even stocks that seem to be rising very quickly and steadily could take sudden and unexpected drops near expiration, taking your in the money call options way out of the money before you can react to the market changes! This means that no matter how confident you are in stock options trading, there is always the possibility of a total loss. Stock options are fantastic leverage instruments but if you simply throw all your money into every trade and hope to strike lucky, then stock options trading will one day wipe out your entire account in one fell swoop.

So, how do we avoid such an outcome?

Simply by applying the number one rule of business! That is:

If you can’t afford to lose it, don’t use it!

Yes, if you could afford to lose only 10% of your account at any one time, you should never use more than 10% of your account on any single stock options trade! This rule is especially important if you are trading out of the money options which have a significant chance of expiring worthless.

For example, if you have a $10000 account and you do not wish to lose more than $1000 at a time, then $1000 should be the maximum amount you use on any single stock options trade. Simple as that! The obvious drawback of this rule is that you will not make as much money as you would have if you had simply punted all your money on a single trade. However, just as you would never bet all your money on a single gamble, you should also never put all your money into a single options trade no matter how confident you are! In fact, this applies to any form of trading as well. It takes a little discipline to stick to this rule especially if you are ‘on a roll’ and tempted to go for the big one. Remember that there is never a problem with making less money but there always is a problem losing more money!

In fact, when you are using only money that you could afford to lose in stock options trading, you can sleep better knowing that you cannot lose more money than you have decided to lose! Your holding power becomes greatly enhanced and you could perhaps ride out temporary downturns better than those stock options traders who punted all their money in one trade. This consequently translates to a higher chance of a win as most stocks eventually come back profitably after temporary pullbacks.

So, stick to the “If you can’t afford to lose it, don’t use it!” rule of options trading and you will be safe in your journey to financial success with stock options trading!

However, trading stock options can be a great way to leverage your investment. For a small fee, with a defined risk, you can control a large amount of stock. The primary thing to remember, options are a wasting asset. When expiration Friday arrives, the option expires. If the option is in the money, you can either use it purchase the stock or redeem the option for the premium value. If the option expires out of the money, you have lost your investment.

Most people try to guess which direction the market is going to move, will it go up or will it go down. If they guess wrong, they lose money. More people trade with call options instead of put options, because they understand going long on the market but do not understand going short.

The vast majority of traders do not utilize trading strategies such as straddles or strangles, much less condors or butterflies. As a result, they are taking on a lot more risk, with less chance of making a profit.

If the beginning trader would take the time to learn some of the various trading strategies, they would greatly decrease their risk and improve the odds of having winning trades tremendously.

Learning the complex option trading strategies is not that hard. First you learn about the simple puts and calls options. When you understand the basic building blocks, you move on to combining the various strike prices and expiration dates. Even the most complex stock option trading strategy is made up of simple puts and calls.

These strategies will reduce the risk to a much lower level. The down side to these trades is you lower the return on the trade. But if the trade goes bad, the strategy will minimize your loss. If you still have money, you can still keep trading. If you lose all of your capital, you are out of the game.

So the people that say day trading stock options is risky are correct. But if you take these simple steps, then you can lower the risk, and still maintain the leverage that trading options will provide.

Tip 1

The most fundamental thing for real time stock options trading is that you actually have some kind of real time link to the markets. There are hundreds of websites out there that claim real time reporting, but you’ll find most of them actually updated every fifteen minutes – still useful, but not exactly real time. If you are serious about trading, consider buying some pro software than can keep you plugged in all the time, and literally update you in real time.

Tip 2

Set yourself some profit goals and some stop losses. There is no point being able to track things in real time unless you have some real objectives. In real time, stock options trading can be very very profitable because it’s one of the only forms of trading where you can profit if the price rises and if it falls too, depending on which kind of option you hold. Always plan your get out price in advance, and never ever waver from it.

Tip 3

Even if you are aren’t trading with anything yet, get used to tracking the data and seeing how certain stock prices perform. Real time stock options trading can be a little trickier to learn, because of all the minute fluctuations in price from one moment to the next. The more tracking you do, and the more data you record, the easier it will be for you to tell the fluctuations from the real price changes.

Tip 4

Find a broker service with low commission. If you do get involved with real time stock options trading, you’ll find that having a broker taking a large slice of commission each trade can really cut into your profits – and sometimes make them unprofitable altogether! If you are doing real time trading, chances are you’ll make more trades than average, so it makes sense to pay less doesn’t it?

These 4 tips should at least give you a starting point with real time stock options trading. Click the links below to find out how your own automated software can boost your profit.