How to Trade Stock Without Buying and Selling
It is possible to trade stocks without buying and selling the stock itself. Options are the solution. With options, it is possible to buy, sell and own the rights to buy or sell a stock at a specific price. These prices allow the owner of the option to buy or sell a stock at a specified price. Additionally, the option itself can also be bought or sold. Learn how to trade stocks without buying or selling the stock itself.
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Instructions
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Evaluate which options to purchase or sell based upon research of the underlying stock. Research stock by looking at its Price/Earnings (PE) ratio, trading volumes, board of directors, research and development plans.
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Select the options to buy or sell. The options symbol looks different from the traditional stock symbol. The symbol for the option is formatted as: stock symbol, option expiration date and strike price. If the option, right, to buy or sell is not exercised, the option expires--the invested money is lost. The strike price is the price at which the underlying stock can be purchased or sold.
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Calculate all transaction costs. Contact the brokerage to verify the fees. As with any financial transaction, there are brokerage and commission fees. The fees associated with buying or selling options are different from those associated with buying or selling stocks.
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Check the account that will be used to handle the transaction. Ensure there is enough money to pay for purchases and fees.
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Call the brokerage to place the transaction or place the transaction online. Have the option symbol and the amount of options to purchase ready.
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Tips & Warnings
There are simulated trading portfolios that can be used to experiment with options purchasing. Options are usually purchased in blocks of 100. Options must be exercised within a certain time frame, if not, the option will expire. There is a specific vernacular used with options trading. Take the time to understand the jargon used when trading options. Do not overextend when purchasing options. Start small to keep the transaction costs low.
Captial gains taxes are incurred when the option is sold at a profit. Consult a tax advisor to understand the tax implications. As with any investment, it is possible to lose money.
