Making Money with Options

This is a simple strategy that does not necessarily involve stock picking. For my example I will the SPY( an ETF that tracks the S&P 500), this tracks 500 of the largest publicly traded companies. First I need a brokerage account that allows me to trade stocks and options. I recommend Option Express which has higher commissions than some brokers but is perfect for novice investors. Next, I buy 100 shares of SPY, lets say at $100. Next, I sell some call options at a strike price for 103.00. I will receive as of today $67. That is an automatic .67% gain. Some reader may say less than one percent I can get that from a bank CD. However, .68% in 30% days translates to 2.04% in 90 days. I do not know the future but SPY goes to $100 by the option expiration date. You made no money on the stock but still made $67. If the stock goes to $103 and is exercised, you made ($68+300) $368. Not bad for a month gain, this can be repeated until kingdom comes. The downside is if SPY goes to $130 you lose $2700 because you HAVE to sell the stock at $103. An option gives someone the option to buy or sell but anyone in there right mind will buy something at 103 if they can sell it for 130 the same hour. This is one way to use options, as my options knowledge expands so will my post regarding options.