Friday, January 30, 2015

Control Your Risk using Stock Options! Using Amazon

I urge people who like to trade or invest to learn how to use options. Don't be scared to learn a new investment tool. I have recently repeated one of my favorite trades buying AMZN mini option contracts AMZN7. When AMZN dropped around the $290 mark I like to buy a few call options at the $295 or $300 strike price a few months out. It is a strategy were if a normal $295 contract cost $1700 you can buy mini contracts at 10% the price. So 2 mini AMZN7 contracts would cost $170*2. Risking $340 and benefiting unlimited on the upside and your down side is capped at $340. After the earnings release I hit what you might call the jackpot, or pot of gold, or my favorite a swan dive right into Scrooge McDuck money bin. I basically made 250% in a week and a half. Amazon does not pay a dividend but in the last year I have made over a $1,000. I did this using roughly $350 over and over investing in mini options. Where did I get the seed money?  The $350 came from dividends from companies like (PM) Phillip Morris and (MCD) McDonalds. Using cash cows to fund other investing opportunities. Managing RISK is important when investing in a company like AMZN who's P/E is crazy to put it mildly. It is good to limit one's downside if things go wrong. The best part is I can reinvest the $1,000 back into my cash cows when they are at lows.

Photo credit Disney

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing

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