Archive for March, 2009
Within the buy to cover orders, there are 4 options in which to place onto your stock purchases. When you buy to cover on a market order, you are in agreement that you will purchase the stock at the current market price, however, because there is a lag between the time you agree to purchase the stock and the actual transaction, a price difference could occur. You could end up paying more than anticipated for each stock, or a considerably lower amount per stock, which is what you are hoping for. You can also buy to cover limit orders, in which guarantees that you will pay no more than the set limit price. However, if stock prices stay above the limit price, this type of buy to cover order will never be executed.
This type of transaction is typically used by investors who are trying to get into a certain market. You may also want to buy to cover stop orders in such case the stop orders become simple market orders as soon as the price is at or above the stop price. This type of order should be used to get you out of an unfavorable market so that you will not lose any profits. And, last, you may choose to buy to cover a limit order that converts to limit order only when the market price is at or above the stop price. You must become familiar with each of the buy to cover orders so that you can make educated decisions about your investments.
From one decision period to the next in the stock market game, the market moves up and down non-stop, meaning that prices of stocks are at a constant changing point. You may think about purchasing a certain stock at $65 per share, and in the next second, the price per share has risen to $165 per share.
This is where the gambling of the stock market comes into play. By learning the advantages of the buy to cover orders, you can increase your chances of earning money on the stock exchange instead of losing money. The most obvious advantage to all of the buy to cover options is that they are in place to make you money, when executed properly.
For example, you would not execute a stop loss on a stock that has steadily increased over a 4 month period. If you did this, you would force yourself to waste money to buy the stock in order to cover your mistake. You decide to buy 175 shares of stocks from Albertson’s, a grocery store chain, at $75 each, for a total investment of $13,125. Over a four month period, you notice that the stocks have gained in profit, and you would like to do something to ensure that you keep this earned profit.
Not knowing any better, you put a stop loss of $50 per stock without consulting your stockbroker. From that point forward, if your stock decreases to $50 per stock, you are forced to sell it, and any previous earned profit is null and void. The only chance you have in gaining back that profit, is if you are quick enough in the non-stop stock market game, to purchase the Albertson’s stocks before someone else does. However, even if you are able to do this, you have still suffered a great loss monetarily.
This is why you must educate yourself BEFORE playing the stock market game.
As with any game, there is some form of risk involved, however, when playing the stock market game, you can prevent a great deal of heartache by simple taking the time to gain knowledge about all types of order you are able to place on your stocks. If you need help learning about types of orders to place on your stocks, you should consult your well-trusted stockbroker in order to seek professional advice before taking matters into your own hands, inevitably forcing yourself to lose your invested money’s profit. Thus, it is absurd to invest your hard earned money into any program before you know all the facts necessary to make a well-informed, educated decision.
By: Pat Jackson
About the Author:
This type of transaction is typically used by investors who are trying to get into a certain market. You may also want to buy to cover stop orders in such case the stop orders become simple market orders as soon as the price is at or above the stop price. This type of order should be used to get you out of an unfavorable market so that you will not lose any profits. And, last, you may choose to buy to cover a limit order that converts to limit order only when the market price is at or above the stop price. You must become familiar with each of the buy to cover orders so that you can make educated decisions about your investments.
From one decision period to the next in the stock market game, the market moves up and down non-stop, meaning that prices of stocks are at a constant changing point. You may think about purchasing a certain stock at $65 per share, and in the next second, the price per share has risen to $165 per share.
This is where the gambling of the stock market comes into play. By learning the advantages of the buy to cover orders, you can increase your chances of earning money on the stock exchange instead of losing money. The most obvious advantage to all of the buy to cover options is that they are in place to make you money, when executed properly.
For example, you would not execute a stop loss on a stock that has steadily increased over a 4 month period. If you did this, you would force yourself to waste money to buy the stock in order to cover your mistake. You decide to buy 175 shares of stocks from Albertson’s, a grocery store chain, at $75 each, for a total investment of $13,125. Over a four month period, you notice that the stocks have gained in profit, and you would like to do something to ensure that you keep this earned profit.
Not knowing any better, you put a stop loss of $50 per stock without consulting your stockbroker. From that point forward, if your stock decreases to $50 per stock, you are forced to sell it, and any previous earned profit is null and void. The only chance you have in gaining back that profit, is if you are quick enough in the non-stop stock market game, to purchase the Albertson’s stocks before someone else does. However, even if you are able to do this, you have still suffered a great loss monetarily.
This is why you must educate yourself BEFORE playing the stock market game.
As with any game, there is some form of risk involved, however, when playing the stock market game, you can prevent a great deal of heartache by simple taking the time to gain knowledge about all types of order you are able to place on your stocks. If you need help learning about types of orders to place on your stocks, you should consult your well-trusted stockbroker in order to seek professional advice before taking matters into your own hands, inevitably forcing yourself to lose your invested money’s profit. Thus, it is absurd to invest your hard earned money into any program before you know all the facts necessary to make a well-informed, educated decision.
By: Pat Jackson
About the Author:
Discover the 7 secrets of profitable stock investing every newbie should know — yours completely FREE! Visit today http://www.StockInvestingProfits.com
Lisha Fahrni
We often hear people saying that trading or investing in options is very risky. Yes, it is certainly no mean feat to trade or invest, using options as your investment vehicle. But is it really that risky in the first place? If trading or investing in options is really risky, then why are there so many individual traders or investors who make money from it? The only possible explanation is that those people had spent a lot of time and effort to study, understand and learn all they can about options in addition to the basic technical knowledge of how the market functions. They would have learnt how to increase their probabilities in making a profit and also reduce their risk to the minimum.
So what actually are stock option greeks? Why is it important to understand how they can affect the profitability of your trade or investment? Stock option greeks are actually sensitivities of the stock option to risks characteristics. These risks are actually factors that affects the pricing of the option. By learning how the stock option greeks relate to risk characteristics in addition to other basic technical analysis skills such as identifying the market trend, knowing when to and not to trade or invest according to timing ( Eg. Not to trade during lunch hours ), interpreting technical indicators correctly, have a risk and money management system to assist in making decisions when trading or investing ( This helps to eliminate and not involve your emotions that affect your trading decisions ) …etc We are able to have certain control over our risk exposures to leverage, time decay, volatility and interest rate risks. Each option risk characteristics, is represented by a greek word and they affect the option pricing differently. It is important to know whether you are purchasing a stock option at a under or over priced value as this can be another factor that will affect profitability of your trade or investment. You do not want to be in a disadvantage position at all times when trading or investing as the majority of the factors are against you and you have absolutely no control over them. ( Eg. Interest rates )
Mastering each risk characteristics will certainly help to reduce risk tremendously when trading or investing in stock options, what’s more, there are lots of stock option strategies that can be utilized once you understand the mechanics of the stock option greeks and make them work for your trade or investment.
By: Ben Ang
About the Author:
So what actually are stock option greeks? Why is it important to understand how they can affect the profitability of your trade or investment? Stock option greeks are actually sensitivities of the stock option to risks characteristics. These risks are actually factors that affects the pricing of the option. By learning how the stock option greeks relate to risk characteristics in addition to other basic technical analysis skills such as identifying the market trend, knowing when to and not to trade or invest according to timing ( Eg. Not to trade during lunch hours ), interpreting technical indicators correctly, have a risk and money management system to assist in making decisions when trading or investing ( This helps to eliminate and not involve your emotions that affect your trading decisions ) …etc We are able to have certain control over our risk exposures to leverage, time decay, volatility and interest rate risks. Each option risk characteristics, is represented by a greek word and they affect the option pricing differently. It is important to know whether you are purchasing a stock option at a under or over priced value as this can be another factor that will affect profitability of your trade or investment. You do not want to be in a disadvantage position at all times when trading or investing as the majority of the factors are against you and you have absolutely no control over them. ( Eg. Interest rates )
Mastering each risk characteristics will certainly help to reduce risk tremendously when trading or investing in stock options, what’s more, there are lots of stock option strategies that can be utilized once you understand the mechanics of the stock option greeks and make them work for your trade or investment.
By: Ben Ang
About the Author:
Hi,I am Ben. I am known to be friendly and easygoing. I am into forex, options and commodities trading…etc All are welcomed to visit my site at The Investor Portaland constructive comments are welcomed.
Katheleen Ellcessor
Professional traders use the term “lean” to refer to one’s perception about the directional strength of the stock. When you own a stock and intend to hold it for a period of time, you are aware that you will probably be holding it while it goes up and while it goes down.
This means that at any given moment in time, you might have a different opinion of the potential movement of that stock. Knowing this, there is a way to address your present level of confidence or “lean.” You do this by your choice of which option you sell.
While it is true that the at-the-money option has the most amount of extrinsic value, it might not always be the ideal option to sell in every situation.
For instance, if you feel that the stock itself has a very high chance of producing capital appreciation above the potential amount of premium you could receive from selling an at-the-money call, then sell an out-of-the-money-call so you can allow yourself a little more room to the upside on the stock.
For example, let’s say the stock is trading at $27.00. Normally, you would sell the 27.5 calls at say $1.00. If the stock were to rise quickly and eclipse the $28.50 mark, then with the buy-write strategy, your position would have maxed out at $28.50, and you would have a $1.50 one month gain. Not bad, but if the stock went to $29.50 then you would have missed out on another $1.00 profit. However, if we had sold the 30 calls for $.30 then we would have another outcome. You bought the stock at $27.00 and sold the 30 calls for $.30 and the stock goes to $29.50.
You would have made $2.50 in capital appreciation and $.30 in option premium for a total of a $2.80 return.
So, if you feel the stock has a real good shot at taking a run up, you can lean your position long by selling an out-of-the-money call.
If you have a more neutral view on your stock you would sell an at-the-money-call in order to receive a bigger premium which allows for greater downside protection if the stock trades down and higher potential profit if the stock becomes stagnant.
This strategy also works on the downside. If, by chance, you feel that the stock may trade down a bit during the life of the option, then you can sell an in-the-money-call. The effect of this would be to provide you with a little extra premium to cover more downside risk.
Remember when you sell an option you seek to capture extrinsic value. An in-the-money option not only has extrinsic value but also some intrinsic value.
When you feel that you want to lean your covered call strategy (buy-write) a little short, choose to sell an in-the-money call so you can also have some intrinsic value to cover your downside.
As an example, say your stock is trading at $29.00 and you feel that your stock may trade down a little but still remain in an uptrend cycle. You don’t want to get rid of the stock but you also don’t want to lose any money so you sell the 27.5 call at $2.00.
The stock starts to trade down and finishes at $26.00. If you had owned the stock naked, then you would have lost three dollars since you owned the stock at $29.00 and it closed at $26.00 on expiration.
However, because you sold the 27.5 calls at $2.00, you would only realize a $1.00 loss in the stock. The premium received will offset the loss due to the fact that you identified and adjusted for a likely move.
As you can see, the buy-write strategy can be altered to fit any directional view you have on your selected stock.
Finally, if you intend to use the buy-write strategy successfully, you generally need to sell the calls against your stock on a consistent, recurring interval, over a period of time.
This means that you will have to be prepared to “roll” your calls out to the next month come expiration. Sometimes, all you’ll need to do is to sell the next month out call.
By: Brett Fogle
About the Author:
This means that at any given moment in time, you might have a different opinion of the potential movement of that stock. Knowing this, there is a way to address your present level of confidence or “lean.” You do this by your choice of which option you sell.
While it is true that the at-the-money option has the most amount of extrinsic value, it might not always be the ideal option to sell in every situation.
For instance, if you feel that the stock itself has a very high chance of producing capital appreciation above the potential amount of premium you could receive from selling an at-the-money call, then sell an out-of-the-money-call so you can allow yourself a little more room to the upside on the stock.
For example, let’s say the stock is trading at $27.00. Normally, you would sell the 27.5 calls at say $1.00. If the stock were to rise quickly and eclipse the $28.50 mark, then with the buy-write strategy, your position would have maxed out at $28.50, and you would have a $1.50 one month gain. Not bad, but if the stock went to $29.50 then you would have missed out on another $1.00 profit. However, if we had sold the 30 calls for $.30 then we would have another outcome. You bought the stock at $27.00 and sold the 30 calls for $.30 and the stock goes to $29.50.
You would have made $2.50 in capital appreciation and $.30 in option premium for a total of a $2.80 return.
So, if you feel the stock has a real good shot at taking a run up, you can lean your position long by selling an out-of-the-money call.
If you have a more neutral view on your stock you would sell an at-the-money-call in order to receive a bigger premium which allows for greater downside protection if the stock trades down and higher potential profit if the stock becomes stagnant.
This strategy also works on the downside. If, by chance, you feel that the stock may trade down a bit during the life of the option, then you can sell an in-the-money-call. The effect of this would be to provide you with a little extra premium to cover more downside risk.
Remember when you sell an option you seek to capture extrinsic value. An in-the-money option not only has extrinsic value but also some intrinsic value.
When you feel that you want to lean your covered call strategy (buy-write) a little short, choose to sell an in-the-money call so you can also have some intrinsic value to cover your downside.
As an example, say your stock is trading at $29.00 and you feel that your stock may trade down a little but still remain in an uptrend cycle. You don’t want to get rid of the stock but you also don’t want to lose any money so you sell the 27.5 call at $2.00.
The stock starts to trade down and finishes at $26.00. If you had owned the stock naked, then you would have lost three dollars since you owned the stock at $29.00 and it closed at $26.00 on expiration.
However, because you sold the 27.5 calls at $2.00, you would only realize a $1.00 loss in the stock. The premium received will offset the loss due to the fact that you identified and adjusted for a likely move.
As you can see, the buy-write strategy can be altered to fit any directional view you have on your selected stock.
Finally, if you intend to use the buy-write strategy successfully, you generally need to sell the calls against your stock on a consistent, recurring interval, over a period of time.
This means that you will have to be prepared to “roll” your calls out to the next month come expiration. Sometimes, all you’ll need to do is to sell the next month out call.
By: Brett Fogle
About the Author:
Options University is the leading source for options education for safer investing and better profits. Brett Fogle, along with Ron Ianieri who was a floor trader for 15 years on the Philadelphia Stock Exchange. Leveraging his experience, the educational company is uniquely qualified to teach investors how to make consistent profits while limiting risk. For more information on Options University training, visit http://www.OptionsUniversity.com .
Luther Munkberg
When you go through pages of newspapers , you probably read about some senior company executives who receive stock options as a package within their compensation.
Stock options are, basically like stocks and shares traded on the market. However, they are different in the sense that these are the rights to trade some shares, at a preset price during a set and precise timetable.
1. The stock option trades are quickly becoming popular
However, be advised that more frequently than anything else, stock options are being undertaken by grants to individual and only a few deserving individuals.
They are like monetary incentives that can be encashed by the employee whenever he lchooses to do so. But, the deadlines are generally not too long.
2. Matters relating to stock options grant trends
One of the issues regarding stock option trading is the question on the date of grant of such stock options.
Because they are typically granted to senior managers, some analysts are suspicious about the timing of the issuance of stock options.
If reports are to be believed, then the time they choose to grant these options coincides usually with the low market value of the stocks, letting them give out that many more stock options. The employees may then hold on to the shares until their values are on the rise again.
This issue and the problem with stock options is currently being reviewed and discussed by the various regulatory agencies throughout the world.
3. Trading with stock options
Wondering how you could trade using stock options? Trading becomes easier than conventional stock trades.
4. You will find many traders willing to deal with stock options on the market
Stock options are named in such a manner because they are in fact options. They are not treated as the normaly stocks and shares, and they have a special place in the market.
The prices are also somewhat different for the most part to the current situation and the other existing stock prices. Generally stock options are sold at a higher than normal share value.
5. Lingo
The world of stock options trades has its own jargon and lingo. Be aware of terms like do and call, when you are dealing with options trades.
‘Call’ means buy. “Put ‘means sell. Thus, when purchasing stock options, you are said to be trading call options. On the other hand if somone says you are trading put options, it means that you are putting up your options for sale..
6. Easy, right?
The expiry date is the agreed deadline set by both sides on when the options would need to be sold. The option must not stay too long in an investor’s hands because they become void once the expiry date is through.
By: Abhishek Agarwal
About the Author:
Stock options are, basically like stocks and shares traded on the market. However, they are different in the sense that these are the rights to trade some shares, at a preset price during a set and precise timetable.
1. The stock option trades are quickly becoming popular
However, be advised that more frequently than anything else, stock options are being undertaken by grants to individual and only a few deserving individuals.
They are like monetary incentives that can be encashed by the employee whenever he lchooses to do so. But, the deadlines are generally not too long.
2. Matters relating to stock options grant trends
One of the issues regarding stock option trading is the question on the date of grant of such stock options.
Because they are typically granted to senior managers, some analysts are suspicious about the timing of the issuance of stock options.
If reports are to be believed, then the time they choose to grant these options coincides usually with the low market value of the stocks, letting them give out that many more stock options. The employees may then hold on to the shares until their values are on the rise again.
This issue and the problem with stock options is currently being reviewed and discussed by the various regulatory agencies throughout the world.
3. Trading with stock options
Wondering how you could trade using stock options? Trading becomes easier than conventional stock trades.
4. You will find many traders willing to deal with stock options on the market
Stock options are named in such a manner because they are in fact options. They are not treated as the normaly stocks and shares, and they have a special place in the market.
The prices are also somewhat different for the most part to the current situation and the other existing stock prices. Generally stock options are sold at a higher than normal share value.
5. Lingo
The world of stock options trades has its own jargon and lingo. Be aware of terms like do and call, when you are dealing with options trades.
‘Call’ means buy. “Put ‘means sell. Thus, when purchasing stock options, you are said to be trading call options. On the other hand if somone says you are trading put options, it means that you are putting up your options for sale..
6. Easy, right?
The expiry date is the agreed deadline set by both sides on when the options would need to be sold. The option must not stay too long in an investor’s hands because they become void once the expiry date is through.
By: Abhishek Agarwal
About the Author:
Abhishek is an expert at Online Trading and he has got some great Trading Secrets up his sleeves! Download his FREE 81 Pages Ebook, “Online Stock Trading Made Easy!” from his website http://www.Trading-Masters.com/766/index.htm . Only limited Free Copies available.
Jackson Dunavant
Buying and selling of shares happen in Stock market. A share of stock is the smallest unit of ownership in a company. If you own a share of a company’s stock, you are a part owner of the company. If the company loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock becomes worthless. The creditors can’t come after your personal assets. There are two types of stock: Common stock , Preferred stock . Most of the stock held by individuals is common stock . NYSE, NSE, BSE etc..are few places where trading of stock happens.
Why Investing In Stock Market? Investing is the proactive use of your money to make more money or, to say it another way, it is your money working for you. Investing is different from saving. Saving is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal (the amount you start out with) and less concerned with return.
Investing in stocks means you are partial owner of a business. Whenever management distributes profit as dividend you will get it. This is called dividend income – a best strategy for passive income. This is best suited for retirement income planning.
As per history, if you compare Return of Investment of stock market to that of high yield bond investment i.e. “junk” in every decade for last 100 years, investing in stock market outperforms others 8 out of 10 times by a fair margin. If your investment horizon is 20 years, statistically return of your stock portfolio will at least beat inflation.
How you Should Invest in Share Market?
Budgeting eats your time. Instead of following complex and boring expense tracking, you simply follow the financial strategies of pay your self first. You should investment at least 30% of your savings in blue chip companies and 20% to high dividend yielding stocks. On Line Investing in stock market is the best way to invest.
How to do Portfolio Management in stock Market?
You should carefully look around your daily life. You will notice what you use daily and what other people are using. This observation will give you fair amount knowledge to those products and companies. Try to understand business model of those companies. Gather more knowledge on those companies.
Understand company’s balance sheet & Profit- loss statement. Look for Profitability in business, cash in hand, auditor’s report, director report of the company. Try to understand the business model of the company and management team. Check return on asset. price/earning, return on equity and credit management of the company for last 5 years. Check analyst report on forward p/e.
If all these are satisfactory, invest in the company. Like these you need to find 6 to 9 companies from 5 sectors like Energy, Oil and Gas, FMCG, Service Sector, Biotech. Pharmaceutical, Bank, entertainment, IT industry and Insurance.
Your investment philosophy is to own a small part of the company for 20 years. This ownership mentality will really give you money in the long run. In the high bull market do partial profit book regularly. If market sentiment is strong bull, buy option. If market sentiment is strong bear buy put option. Use 5% of your money in option trading. Option trading basically used to hedge your asset and also make some speculative gain.
In strong bear market, your blue chip companies can generate good income if you use covered call option regularly. It’s not difficult to get 40% p.a. ROI by writing Covered Call Option.
Money Management tricks for you to ride Bear – Bull of Stock Market
1. Never investment more than 50% of your savings in stock market 2. It is necessary to invest in speculative investment for big money but never invest more than 10% of your portfolio. 3. Get out of loss making investment. It will protect you from bigger loss and the loss you can offset against your profit in your tax return. 4. Do not make buy decision out of greed. 5. Do not take sell decision under panic 6. Understand the market and where you investment with clear objective why you are investing.
By: Arindam Chattopadhyay
About the Author:
Why Investing In Stock Market? Investing is the proactive use of your money to make more money or, to say it another way, it is your money working for you. Investing is different from saving. Saving is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal (the amount you start out with) and less concerned with return.
Investing in stocks means you are partial owner of a business. Whenever management distributes profit as dividend you will get it. This is called dividend income – a best strategy for passive income. This is best suited for retirement income planning.
As per history, if you compare Return of Investment of stock market to that of high yield bond investment i.e. “junk” in every decade for last 100 years, investing in stock market outperforms others 8 out of 10 times by a fair margin. If your investment horizon is 20 years, statistically return of your stock portfolio will at least beat inflation.
How you Should Invest in Share Market?
Budgeting eats your time. Instead of following complex and boring expense tracking, you simply follow the financial strategies of pay your self first. You should investment at least 30% of your savings in blue chip companies and 20% to high dividend yielding stocks. On Line Investing in stock market is the best way to invest.
How to do Portfolio Management in stock Market?
You should carefully look around your daily life. You will notice what you use daily and what other people are using. This observation will give you fair amount knowledge to those products and companies. Try to understand business model of those companies. Gather more knowledge on those companies.
Understand company’s balance sheet & Profit- loss statement. Look for Profitability in business, cash in hand, auditor’s report, director report of the company. Try to understand the business model of the company and management team. Check return on asset. price/earning, return on equity and credit management of the company for last 5 years. Check analyst report on forward p/e.
If all these are satisfactory, invest in the company. Like these you need to find 6 to 9 companies from 5 sectors like Energy, Oil and Gas, FMCG, Service Sector, Biotech. Pharmaceutical, Bank, entertainment, IT industry and Insurance.
Your investment philosophy is to own a small part of the company for 20 years. This ownership mentality will really give you money in the long run. In the high bull market do partial profit book regularly. If market sentiment is strong bull, buy option. If market sentiment is strong bear buy put option. Use 5% of your money in option trading. Option trading basically used to hedge your asset and also make some speculative gain.
In strong bear market, your blue chip companies can generate good income if you use covered call option regularly. It’s not difficult to get 40% p.a. ROI by writing Covered Call Option.
Money Management tricks for you to ride Bear – Bull of Stock Market
1. Never investment more than 50% of your savings in stock market 2. It is necessary to invest in speculative investment for big money but never invest more than 10% of your portfolio. 3. Get out of loss making investment. It will protect you from bigger loss and the loss you can offset against your profit in your tax return. 4. Do not make buy decision out of greed. 5. Do not take sell decision under panic 6. Understand the market and where you investment with clear objective why you are investing.
By: Arindam Chattopadhyay
About the Author:
Author is a wealth Advisor. He helped people to accumulate wealth under different challenging market situation.Please visit his website http://www.financial-planning-retirement.com for some more free but interesting information.
Phillip Casar
The buy write covered call is a slightly different strategy from the over write strategy, although the mechanics are identical in terms of outcome and follow on actions. The difference is in the strike price you choose and the period. In a previous article using the over write strategy, we looked at an example using British Airways, a UK share, but one which only had quarterly options available. There are some heavily traded UK equity options which are available monthly, but most UK options tend to be quarterly as the market is much smaller.
In the US, because the market is enormous, most stock will have monthly options and therefore I find this strategy lends itself better to the US markets. The stocks you are looking for are those that are trending sideways. Remember the idea with all call writing is to find a stock that you can write an option on which will then expire worthless, allowing you to repeat the exercise. You do not want shares or stocks that are shooting skywards!!!! – when you are looking at your charts look for shares that are moving in channels sideways, perhaps have hit some resistance – we do not want highly volatile stocks either ( you will need to become familiar with volatility – both historic and implied ) -the whole point of the strategy is NOT to be exercised. When you become more familiar with these things you will see that volatility and premium price are intertwined. It is obvious when you think about it – if a share moves violently all over the place it has a much higher chance of achieving the strike price and therefore will have a higher premium. This is particularly true on the US market – in the UK it is not so bad as those quoted are mainly FTSE 100. Please be careful, there are some real horrors. I would strongly suggest that you stay away from those in the pharmaceutical sector for example, as a new drug or a drug withdrawn can have dramatic effects on the stock price.
So, we are looking for stocks with relatively low volatility, and preferably in the top 500 -1000 US companies by market capitalisation. They should be moving sideways on the charts in a channel in a neutral to slightly bullish trend ( after all you don’t want to be buying a stock that you should be shorting!! ). Having identified possible candidates you then check their option series and look for the next month and the next available strike price out of the money. Lets take Dell computers as an example. Share price : June 21st Dell $24.08, – July Call Option :Strike Price : $25.00, Call Option : $ 0.40
We would therefore buy 100 Dell shares at 24.08 and at the same time write a call option with a strike price at 25.00. giving us a premium of $40. If the share price increases and we are exercised we have a profit of 0.92 x 100 + 0.40 x 100 = $132 for the month. If the share price does not increase but remains the same or falls, the premium may offset some of the decline in price, and we can then write another call. The ideal of course is that the price closes close to the strike price, so we keep the premium and the shares, and then write another option at $25 which would have a much higher premium as the share price would then be ‘almost in the money’ which would give a much higher premium.
There are many ways to use this trading technique, but you also need to understand the Greeks, and implied/historic volatility in order to analyse the value of the premium that you are considering. Once you have started writing covered calls on a regular basis, you will discover numerous reasons why you might want to close or modify a position before expiry.. There are a whole variety of techniques that allow you to ‘roll’ positions forward, to take advantage of situations that may arise during the course of a contract.
By: anna coulling
About the Author:
In the US, because the market is enormous, most stock will have monthly options and therefore I find this strategy lends itself better to the US markets. The stocks you are looking for are those that are trending sideways. Remember the idea with all call writing is to find a stock that you can write an option on which will then expire worthless, allowing you to repeat the exercise. You do not want shares or stocks that are shooting skywards!!!! – when you are looking at your charts look for shares that are moving in channels sideways, perhaps have hit some resistance – we do not want highly volatile stocks either ( you will need to become familiar with volatility – both historic and implied ) -the whole point of the strategy is NOT to be exercised. When you become more familiar with these things you will see that volatility and premium price are intertwined. It is obvious when you think about it – if a share moves violently all over the place it has a much higher chance of achieving the strike price and therefore will have a higher premium. This is particularly true on the US market – in the UK it is not so bad as those quoted are mainly FTSE 100. Please be careful, there are some real horrors. I would strongly suggest that you stay away from those in the pharmaceutical sector for example, as a new drug or a drug withdrawn can have dramatic effects on the stock price.
So, we are looking for stocks with relatively low volatility, and preferably in the top 500 -1000 US companies by market capitalisation. They should be moving sideways on the charts in a channel in a neutral to slightly bullish trend ( after all you don’t want to be buying a stock that you should be shorting!! ). Having identified possible candidates you then check their option series and look for the next month and the next available strike price out of the money. Lets take Dell computers as an example. Share price : June 21st Dell $24.08, – July Call Option :Strike Price : $25.00, Call Option : $ 0.40
We would therefore buy 100 Dell shares at 24.08 and at the same time write a call option with a strike price at 25.00. giving us a premium of $40. If the share price increases and we are exercised we have a profit of 0.92 x 100 + 0.40 x 100 = $132 for the month. If the share price does not increase but remains the same or falls, the premium may offset some of the decline in price, and we can then write another call. The ideal of course is that the price closes close to the strike price, so we keep the premium and the shares, and then write another option at $25 which would have a much higher premium as the share price would then be ‘almost in the money’ which would give a much higher premium.
There are many ways to use this trading technique, but you also need to understand the Greeks, and implied/historic volatility in order to analyse the value of the premium that you are considering. Once you have started writing covered calls on a regular basis, you will discover numerous reasons why you might want to close or modify a position before expiry.. There are a whole variety of techniques that allow you to ‘roll’ positions forward, to take advantage of situations that may arise during the course of a contract.
By: anna coulling
About the Author:
Anna Coulling is a full time currency trader providing free advice and help to women traders and investors around the world via her web site. She has been trading for over 15 years, and has experience in a wide range of financial instruments including stocks,shares,options,spread betting and futures. For more information or to contact Anna please click on the link below : trading,investing,women,traders,shares,stocks,currency,forex,options,calls,puts,candlesticks.
Sarah Riise
Ask
The lowest price a seller is willing to accept when selling a security (stock). This is the opposite of bid, which is the price a buyer is willing to pay for a security, and the ask will always be higher than the bid.
The terms “bid” and “ask” are used in nearly every financial market in the world covering stocks, bonds, currency and derivatives. An example of an ask in the stock market would be $5 x 1,000 which means that someone is offering to sell 1,000 shares for $5.
Bear
An investor who believes the market as a whole or a particular stock will decline. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market. A bear is the opposite of a Bull.
Bid
An offer made by a trader to buy a security. The bid will specify both the price at which the buyer is willing to purchase the security and the quantity to be purchased. This is the opposite of the ask, which stipulates the price a seller is willing to accept for a security and the quantity of the security to be sold at that price.
An example of a bid in the market would be $25 x 1,000, which means that an investor is willing to purchase 1,000 shares at the price of $25. If a seller in the market is willing to sell that amount for that price, then the transaction is completed.
Book Value
The Book Value is simply the company’s assets minus its liabilities.
In other words, if you wanted to close the doors, how much would be left after you settled all the outstanding obligations and sold off all the assets.
A company that is a viable growing business will always be worth more than its book value for its ability to generate earnings and growth.
Broker
A person that buys or sells an investment vehicle for you (securities, bonds, commodities, etc.,) in exchange for a fee, which is called a commission
Bull
An investor who believes the general market or a particular stock is going to increase in price.
Buy Back
The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.
Cash Dividend
Money paid to stockholders, normally out of the corporation’s current earnings or accumulated profits. All dividends must be declared by the board of directors, and are taxable income to the recipients.
Long-term investors who want to maximize their gains should consider re-investing the dividends. Most brokers offer a choice as to whether you wish to reinvest or take cash dividends.
By: Anthony Green
About the Author:
The lowest price a seller is willing to accept when selling a security (stock). This is the opposite of bid, which is the price a buyer is willing to pay for a security, and the ask will always be higher than the bid.
The terms “bid” and “ask” are used in nearly every financial market in the world covering stocks, bonds, currency and derivatives. An example of an ask in the stock market would be $5 x 1,000 which means that someone is offering to sell 1,000 shares for $5.
Bear
An investor who believes the market as a whole or a particular stock will decline. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market. A bear is the opposite of a Bull.
Bid
An offer made by a trader to buy a security. The bid will specify both the price at which the buyer is willing to purchase the security and the quantity to be purchased. This is the opposite of the ask, which stipulates the price a seller is willing to accept for a security and the quantity of the security to be sold at that price.
An example of a bid in the market would be $25 x 1,000, which means that an investor is willing to purchase 1,000 shares at the price of $25. If a seller in the market is willing to sell that amount for that price, then the transaction is completed.
Book Value
The Book Value is simply the company’s assets minus its liabilities.
In other words, if you wanted to close the doors, how much would be left after you settled all the outstanding obligations and sold off all the assets.
A company that is a viable growing business will always be worth more than its book value for its ability to generate earnings and growth.
Broker
A person that buys or sells an investment vehicle for you (securities, bonds, commodities, etc.,) in exchange for a fee, which is called a commission
Bull
An investor who believes the general market or a particular stock is going to increase in price.
Buy Back
The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.
Cash Dividend
Money paid to stockholders, normally out of the corporation’s current earnings or accumulated profits. All dividends must be declared by the board of directors, and are taxable income to the recipients.
Long-term investors who want to maximize their gains should consider re-investing the dividends. Most brokers offer a choice as to whether you wish to reinvest or take cash dividends.
By: Anthony Green
About the Author:
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Tory Elbogen
The amount of stock options being traded in America is exploding! This is great news because there is far greater liquidity in the options market and many more money making opportunities for individual traders just like you. During the next ten weeks I will be writing articles on how you can profit from one of the fastest growing areas of financial investment available to individuals.
In case you don’t know what a stock option is let me explain. Simply, a stock option gives you the right to control the ownership of a stock for a fraction of the price to buy it. There are two types of options; the first is a Call Option which is the option to buy a share of a certain company for a predetermined price before a predetermined date. The second is a Put Option, which is the option to sell a share of a certain company for a predetermined price before a predetermined date.
For example if you purchased 100 shares in ABC Company that traded at $50 each, you would have to invest $5000 to buy those shares. However you could buy 100 Call Options priced at $5 each, with the right to buy ABC Company at $50 any time up to a date in the future (say November 16th) and you would control the same amount of shares for only $500. If the price of ABC Company goes up by $5 and you owned the shares you would have made $500 or 10% on your $5000 investment, however because the Call Options give you the right to buy the shares at $50 and they are now worth $55 the price of the options would go up $5 as well and you would have made $500 or 100% on your $500 investment. This example demonstrates the great leverage stock options provide.
Call Options are used when you expect the price of a stock to rise, if you expect the price of a stock to fall you can buy Put Options, which as mentioned before, give you the right to sell a stock at a predetermined price. So in the example above if the price of ABC shares fell to $45 and we had bought Put Options giving us the right to sell ABC at $50, the Put Options would be worth money because you could buy ABC shares in the market for a cheaper price than you could sell them for. Wonderful isn’t it, you can make money if the stock market is rising or falling!
To summarize a stock option has four components to it:
1. The underlying stock
The stock that the option is traded on (ABC Company in the example above).
2. The exercise date
The predetermined date, before which, you can use or exercise your option. Options always expire on the third Friday of each month (November 16th in the example above).
3. The strike price
The predetermined price you can buy the stock for ($50 in the example above). 4. The type of option
Either a Call or a Put option.
Here is the first key to successful stock options investing. It is very simple: practice, practice, practice. I cannot stress enough how important practice will be to your success as a stock options trader. Trading options is an inherently risky endeavor, however by learning the keys to successful stock options trading it is possible to mitigate this risk and maximize your gains. Options are a zero sum game, which means for every winner there has to be a loser. I’m sure you want to be a winner and not a loser, right? So you must take the time to learn the fundamental theories of options trading and practice the strategies behind options trading before you risk any of your hard earned capital in the market. It is only when you are winning seven out of ten trades on paper and you are confident in your trading plan and money management techniques that you should trade in the market for real. By the time you have finished reading these articles you will have a plan and know just what those money management techniques are. Look out for Key #2 coming soon.
US Government required disclaimer: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of the Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500 Chicago, IL 60606 (1-800-678-4667).
By: Roger Cox
About the Author:
In case you don’t know what a stock option is let me explain. Simply, a stock option gives you the right to control the ownership of a stock for a fraction of the price to buy it. There are two types of options; the first is a Call Option which is the option to buy a share of a certain company for a predetermined price before a predetermined date. The second is a Put Option, which is the option to sell a share of a certain company for a predetermined price before a predetermined date.
For example if you purchased 100 shares in ABC Company that traded at $50 each, you would have to invest $5000 to buy those shares. However you could buy 100 Call Options priced at $5 each, with the right to buy ABC Company at $50 any time up to a date in the future (say November 16th) and you would control the same amount of shares for only $500. If the price of ABC Company goes up by $5 and you owned the shares you would have made $500 or 10% on your $5000 investment, however because the Call Options give you the right to buy the shares at $50 and they are now worth $55 the price of the options would go up $5 as well and you would have made $500 or 100% on your $500 investment. This example demonstrates the great leverage stock options provide.
Call Options are used when you expect the price of a stock to rise, if you expect the price of a stock to fall you can buy Put Options, which as mentioned before, give you the right to sell a stock at a predetermined price. So in the example above if the price of ABC shares fell to $45 and we had bought Put Options giving us the right to sell ABC at $50, the Put Options would be worth money because you could buy ABC shares in the market for a cheaper price than you could sell them for. Wonderful isn’t it, you can make money if the stock market is rising or falling!
To summarize a stock option has four components to it:
1. The underlying stock
The stock that the option is traded on (ABC Company in the example above).
2. The exercise date
The predetermined date, before which, you can use or exercise your option. Options always expire on the third Friday of each month (November 16th in the example above).
3. The strike price
The predetermined price you can buy the stock for ($50 in the example above). 4. The type of option
Either a Call or a Put option.
Here is the first key to successful stock options investing. It is very simple: practice, practice, practice. I cannot stress enough how important practice will be to your success as a stock options trader. Trading options is an inherently risky endeavor, however by learning the keys to successful stock options trading it is possible to mitigate this risk and maximize your gains. Options are a zero sum game, which means for every winner there has to be a loser. I’m sure you want to be a winner and not a loser, right? So you must take the time to learn the fundamental theories of options trading and practice the strategies behind options trading before you risk any of your hard earned capital in the market. It is only when you are winning seven out of ten trades on paper and you are confident in your trading plan and money management techniques that you should trade in the market for real. By the time you have finished reading these articles you will have a plan and know just what those money management techniques are. Look out for Key #2 coming soon.
US Government required disclaimer: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of the Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500 Chicago, IL 60606 (1-800-678-4667).
By: Roger Cox
About the Author:
Roger Cox is a native of New Zealand and now resides in Los Angeles. President of an international freight company he decided corporate life wasn’t for him and starting his own consulting business. Roger has been successful in trading stock options, practicing and trading for more than 4 years and teaches others about trading at
http://www.prosperitywithoptions.com
Gennie Lanfear
With the recent rash of dividend cuts by historically dependable dividend-paying companies, income investors are finding it increasingly challenging to find safe high dividend yields. Indeed, Standard & Poor’s expects 2009 to have the biggest drop in dividend payouts since 1942. The market decline has created many accidentally high dividend stocks, as companies who’ve maintained their dividend payouts in spite of share price declines suddenly find themselves paying out record high dividend yields. The other edge to this sword is that many companies are slashing their dividend payouts to conserve cash, reasoning that their lower payouts still offer a strong yield, given their lower share price. In addition, the increased volatility associated with the market’s decline has devalued investors’ principal, leaving them with less capital to invest, if they choose to re-balance their portfolios.
A useful, conservative strategy that actually capitalizes on the market’s volatility to lock in high dividend yields is the Covered Call Selling or Buy/Write technique. The increased market volatility has increased call option premiums, giving investors the opportunity to sell high yield covered calls on many stocks, in effect giving them a one-time “double dividend”, reducing their initial investment cash outlay, and also offering them some downside protection. Since no company can cut the premium on their call options, these instruments are tantamount to an “ironclad” dividend. Indeed, the current call premiums are often giving investors higher yields than the underlying stock dividends. So, even if the company does cut its dividend, the investor will still retain the premium from his covered call sale. In addition, a call seller receives the call premium money back into his account upon settlement, (usually trade date plus 3 days).
Covered call writing also gives you the potential for capital gains, in addition to the high yields that you get from the call premium/dividend yield, should the stock be assigned, (sold), at expiration. Investors often sell covered calls that are approximately 5-20% above the stock’s current price, giving themselves the potential to realize an additional 5-20% profit, should these stocks rise past the covered call thresholds by the end of the investment term. Given the historic lows that many companies’ share prices have fallen to, many traditional value investors feel that they are buying these stocks at undervalued prices, and reason that there’s a very good chance of them rising in the future.
To illustrate this technique, let’s take a look at the prices for NYSE/Euronext (NYX),
as of March 4, 2009 market close:
STOCK COST/ SHARE: $16.36
ANNUAL DIVIDEND: $1.20/SHARE
DIVIDEND YIELD: 7.33%
CALL EXPIRATION DATE: JAN. 15, 2010
CALL STRIKE PRICE: $17.50
CALL PREMIUM: $3.25
STATIC CALL YIELD: 19.86%
TOTAL STATIC YIELD: 27.19%
TOTAL POTENTIAL ASSIGNED YIELD: 34.16%
As you can see from the yields in this example, this stock’s 19.86% call selling yield is 2.7 times its dividend yield of 7.33%. So, even if they were to cut their dividend, the investor in this example would still have nearly 20% downside protection. If the dividend remains intact, the downside protection in this trade is 27.19%, equivalent to the total static yield, (the combination of the dividend and call yields).In addition, by selling a call at the $17.50 strike price, approximately 7% above the $16.36 cost/share, this investor also has the potential to for a total assigned yield of 34.16%, making a very compelling case for this strategy.
Trade Summary for this Example:
Breakeven: $11.91
Maximum Share Reselling Price: $17.50
Static Yield: $435.00
Potential Assigned Yield: $559.00
Investment Term: 10+ months (The Annualized Yields would be even higher than the yields listed above).
Definitions:
Static Call Yield: The yield realized when the underlying shares are NOT assigned/(sold) at or before expiration. In a “static” scenario, the stock’s share price doesn’t rise above or close enough to the combination price of the strike price, plus the call premium, to make it worthwhile for the shares to be bought by the call buyer on the other side of the trade. In the above example, the share price would have to rise above or near $20.75, ($17.50 strike price plus the $3.25 call premium), to make it worthwhile for the call buyer to exercise his option to buy your shares.
Total Static Yield: The combined dividend and static call yields.
Assigned Call Yield: The yield realized when the underlying shares ARE assigned/(sold) at or before expiration. This normally occurs when the stock’s share price rises to or above the combination price of the strike price, plus the call premium, causing the shares to be assigned, (sold), at the strike price, which in the above example is $17.50.
Risks and Limits: As with any investment, there are risks. Obviously, this strategy can’t guarantee that these stocks won’t decline further in value once you’ve bought them. However, this value-based, “double dividend” covered call strategy will at the very least give you more downside protection than if you had only bought the stocks outright, and the call premium lowers your cost basis.
Upside Risk: Since this strategy quantifies the upper limit of your profit potential, you should be aware that, even if the stock appreciates far past your strike price and call premium, you’ll still be obligated to sell it at your covered call strike price, which places a limit on your profit potential. It’s usually wise to research the call’s theoretical value in an options pricing model, such as Black-Sholes, before placing the trade, to ascertain the chances of the call ending up in the money at expiration. You should always analyze your static and assigned gains, and breakeven point before placing any Covered call, (Buy/Write), strategy. Many of the online brokers have automated options pricing calculators that simplify this process.
Downside Risk: The biggest risk factor in selling covered calls is that you are putting much more money at risk here than by merely buying a call option. However, research has shown that the odds tend to favor option sellers over buyers. You should make sure you research any stock thoroughly before executing this or any other strategy. However, as noted before, if the stock declines past your breakeven, you should be able to offset some of the loss by “buying back in” your sold calls at a profit, and perhaps rolling into a lower strike price call, if you want to maintain your underlying position.
copyright 2009 DeMar Marketing. All Rights Reserved Worldwide. This article was written for informational purposes only. Readers should not make any investment decisions based solely on the information in this article.
By: robert hauver
About the Author:
A useful, conservative strategy that actually capitalizes on the market’s volatility to lock in high dividend yields is the Covered Call Selling or Buy/Write technique. The increased market volatility has increased call option premiums, giving investors the opportunity to sell high yield covered calls on many stocks, in effect giving them a one-time “double dividend”, reducing their initial investment cash outlay, and also offering them some downside protection. Since no company can cut the premium on their call options, these instruments are tantamount to an “ironclad” dividend. Indeed, the current call premiums are often giving investors higher yields than the underlying stock dividends. So, even if the company does cut its dividend, the investor will still retain the premium from his covered call sale. In addition, a call seller receives the call premium money back into his account upon settlement, (usually trade date plus 3 days).
Covered call writing also gives you the potential for capital gains, in addition to the high yields that you get from the call premium/dividend yield, should the stock be assigned, (sold), at expiration. Investors often sell covered calls that are approximately 5-20% above the stock’s current price, giving themselves the potential to realize an additional 5-20% profit, should these stocks rise past the covered call thresholds by the end of the investment term. Given the historic lows that many companies’ share prices have fallen to, many traditional value investors feel that they are buying these stocks at undervalued prices, and reason that there’s a very good chance of them rising in the future.
To illustrate this technique, let’s take a look at the prices for NYSE/Euronext (NYX),
as of March 4, 2009 market close:
STOCK COST/ SHARE: $16.36
ANNUAL DIVIDEND: $1.20/SHARE
DIVIDEND YIELD: 7.33%
CALL EXPIRATION DATE: JAN. 15, 2010
CALL STRIKE PRICE: $17.50
CALL PREMIUM: $3.25
STATIC CALL YIELD: 19.86%
TOTAL STATIC YIELD: 27.19%
TOTAL POTENTIAL ASSIGNED YIELD: 34.16%
As you can see from the yields in this example, this stock’s 19.86% call selling yield is 2.7 times its dividend yield of 7.33%. So, even if they were to cut their dividend, the investor in this example would still have nearly 20% downside protection. If the dividend remains intact, the downside protection in this trade is 27.19%, equivalent to the total static yield, (the combination of the dividend and call yields).In addition, by selling a call at the $17.50 strike price, approximately 7% above the $16.36 cost/share, this investor also has the potential to for a total assigned yield of 34.16%, making a very compelling case for this strategy.
Trade Summary for this Example:
Breakeven: $11.91
Maximum Share Reselling Price: $17.50
Static Yield: $435.00
Potential Assigned Yield: $559.00
Investment Term: 10+ months (The Annualized Yields would be even higher than the yields listed above).
Definitions:
Static Call Yield: The yield realized when the underlying shares are NOT assigned/(sold) at or before expiration. In a “static” scenario, the stock’s share price doesn’t rise above or close enough to the combination price of the strike price, plus the call premium, to make it worthwhile for the shares to be bought by the call buyer on the other side of the trade. In the above example, the share price would have to rise above or near $20.75, ($17.50 strike price plus the $3.25 call premium), to make it worthwhile for the call buyer to exercise his option to buy your shares.
Total Static Yield: The combined dividend and static call yields.
Assigned Call Yield: The yield realized when the underlying shares ARE assigned/(sold) at or before expiration. This normally occurs when the stock’s share price rises to or above the combination price of the strike price, plus the call premium, causing the shares to be assigned, (sold), at the strike price, which in the above example is $17.50.
Risks and Limits: As with any investment, there are risks. Obviously, this strategy can’t guarantee that these stocks won’t decline further in value once you’ve bought them. However, this value-based, “double dividend” covered call strategy will at the very least give you more downside protection than if you had only bought the stocks outright, and the call premium lowers your cost basis.
Upside Risk: Since this strategy quantifies the upper limit of your profit potential, you should be aware that, even if the stock appreciates far past your strike price and call premium, you’ll still be obligated to sell it at your covered call strike price, which places a limit on your profit potential. It’s usually wise to research the call’s theoretical value in an options pricing model, such as Black-Sholes, before placing the trade, to ascertain the chances of the call ending up in the money at expiration. You should always analyze your static and assigned gains, and breakeven point before placing any Covered call, (Buy/Write), strategy. Many of the online brokers have automated options pricing calculators that simplify this process.
Downside Risk: The biggest risk factor in selling covered calls is that you are putting much more money at risk here than by merely buying a call option. However, research has shown that the odds tend to favor option sellers over buyers. You should make sure you research any stock thoroughly before executing this or any other strategy. However, as noted before, if the stock declines past your breakeven, you should be able to offset some of the loss by “buying back in” your sold calls at a profit, and perhaps rolling into a lower strike price call, if you want to maintain your underlying position.
copyright 2009 DeMar Marketing. All Rights Reserved Worldwide. This article was written for informational purposes only. Readers should not make any investment decisions based solely on the information in this article.
By: robert hauver
About the Author:
Robert Hauver publishes The Double Dividend Stock Alert, a monthly investment newsletter that features high-yield, risk-reducing strategies for investors.
To learn more about the strategy in this article and our other free reports, please visit:
http://www.DoubleDividendStocks.com
Christopher Golumski
How dangerous is an overweight foam Spa Cover? Recently a friend was checking the chemicals in his spa. Rather than attempting removing the entire spa cover, he decided to just lift one side enough to get at the water long enough to get a sample. He bent over and supporting the heavy cover with his left arm while attempting to fill a sampling bottle with water from the spa to check the chemical content, and total alkalinity.
As he leaned over further, the weight of the water logged spa cover dislocated his left shoulder and allowed the cover to hit him on the back knocking him into the spa. He was now face down in the spa with his legs pinned to spa by the weight of the spa cover. His shoulder was dislocated and unlike the Mel Gibson character in Lethal Weapon, he was in agony because of a the pain. He tried to move but could not budge the weight of the waterlogged cover.
He began to choke as he swallowed spa water and tried to rise up but could barely get his head out of the water. With what could have been his last breath, he screamed for help. Fortunately he had left the door from the house to the deck open. His daughter and her boy friend heard the commotion and looked out to see his legs sticking out of the spa cover.
His daughter and her boy friend were able to lift the cover off of his legs. His daughters boy friend jumped into the hot tub and pulled him up from the water. They took him to the emergency room where they put his shoulder back in place and treated him for shock.
Women who have experienced both child birth and a dislocated shoulder report dislocating a shoulder as more intense than childbirth. I do not know about that, I suspect that with child birth you can prepare mentally for the pain and with the shoulder it comes at you unexpectedly. But either way I think we can agree the pain is excruciating.
My friend had owned a hot tub for 12 years and had replaced 3 conventional rigid foam core spa covers. While the life on the foam covers had averaged from 2 to 4 years, regardless of manufactures claims, all the covers became waterlogged. He has since bought a Spa Cover that uses air chambers to insulate rather than rigid foam. He is certain that the air filled spa cover will not try to kill him as the other foam cover did.
A lady friend of ours and her husband were in the hot tub with their rigid foam spa lid propped up against the wall. A gust of wind hit the spa cover and it suddenly fell hitting her husband on the head. The blow was hard enough to push them both under the water. Fortunately they were not trapped and they both recovered quickly, or so they thought.
A couple of days later the left side of her husbands face suddenly went DEAD. He had no feeling, sensation or movement. Naturally they both were quite frightened and thought he had suffered a stroke. They did exactly what any of us would do and rushed immediately to the hospital. The doctor diagnosed him with Bells Palsy which can be caused by stress and or trauma like a heavy spa cover hitting him on the head. He later made a full recovery. He was extremely lucky.
Here is something you will never hear from a foam spa cover dealer. Every year people are injured by foam hot tub covers. Most of the injuries have come from a gust of wind blowing the heavy foam cover onto people as they use their spa. Sometimes people attempting to carefully maneuver a saturated foam cover off their spa, have lost their grip and had the hard foam cover slam down breaking the arch of their foot.
According to the U.S. Consumer Product Safety Commission people have even been drowned when they have become trapped under heavy foam covers. Maybe now is a good time to search for a better spa cover. With the World Wide Web, you can literally have the world to shop from. Do you really want to risk injury or death trying to use your spa?
By: Spa Covers
About the Author:
As he leaned over further, the weight of the water logged spa cover dislocated his left shoulder and allowed the cover to hit him on the back knocking him into the spa. He was now face down in the spa with his legs pinned to spa by the weight of the spa cover. His shoulder was dislocated and unlike the Mel Gibson character in Lethal Weapon, he was in agony because of a the pain. He tried to move but could not budge the weight of the waterlogged cover.
He began to choke as he swallowed spa water and tried to rise up but could barely get his head out of the water. With what could have been his last breath, he screamed for help. Fortunately he had left the door from the house to the deck open. His daughter and her boy friend heard the commotion and looked out to see his legs sticking out of the spa cover.
His daughter and her boy friend were able to lift the cover off of his legs. His daughters boy friend jumped into the hot tub and pulled him up from the water. They took him to the emergency room where they put his shoulder back in place and treated him for shock.
Women who have experienced both child birth and a dislocated shoulder report dislocating a shoulder as more intense than childbirth. I do not know about that, I suspect that with child birth you can prepare mentally for the pain and with the shoulder it comes at you unexpectedly. But either way I think we can agree the pain is excruciating.
My friend had owned a hot tub for 12 years and had replaced 3 conventional rigid foam core spa covers. While the life on the foam covers had averaged from 2 to 4 years, regardless of manufactures claims, all the covers became waterlogged. He has since bought a Spa Cover that uses air chambers to insulate rather than rigid foam. He is certain that the air filled spa cover will not try to kill him as the other foam cover did.
A lady friend of ours and her husband were in the hot tub with their rigid foam spa lid propped up against the wall. A gust of wind hit the spa cover and it suddenly fell hitting her husband on the head. The blow was hard enough to push them both under the water. Fortunately they were not trapped and they both recovered quickly, or so they thought.
A couple of days later the left side of her husbands face suddenly went DEAD. He had no feeling, sensation or movement. Naturally they both were quite frightened and thought he had suffered a stroke. They did exactly what any of us would do and rushed immediately to the hospital. The doctor diagnosed him with Bells Palsy which can be caused by stress and or trauma like a heavy spa cover hitting him on the head. He later made a full recovery. He was extremely lucky.
Here is something you will never hear from a foam spa cover dealer. Every year people are injured by foam hot tub covers. Most of the injuries have come from a gust of wind blowing the heavy foam cover onto people as they use their spa. Sometimes people attempting to carefully maneuver a saturated foam cover off their spa, have lost their grip and had the hard foam cover slam down breaking the arch of their foot.
According to the U.S. Consumer Product Safety Commission people have even been drowned when they have become trapped under heavy foam covers. Maybe now is a good time to search for a better spa cover. With the World Wide Web, you can literally have the world to shop from. Do you really want to risk injury or death trying to use your spa?
By: Spa Covers
About the Author:
The Author is a business owner with more than twenty years experience. A former Police Sgt, Pilot, Heavy Equipment Operator, Trained Mechanic that has written technical manuals and short stories. An accomplished motorcycle rider he enjoys riding the back roads of Washington on his Harley Davidson, with his wife riding copilot. Please visit SpaCap.com Spa Covers.
Ted Perrott