Mastering Stocks: Strategies for Day Trading, Options Trading, Dividend Investing and Making a Living from the Stock Market by Michael K. Brown

Mastering Stocks: Strategies for Day Trading, Options Trading, Dividend Investing and Making a Living from the Stock Market by Michael K. Brown

Chapter 1 – Entering the Stock Market
Field
The stock market is one of the most exciting fields of investment. There
are thousands of stocks from all over the world available for trading.
There are stocks available for all budgets. There are stocks that only cost
a few dollars per share and some high-end stocks worth thousands of
dollars per share.
Stock trading is a massive industry where billions of dollars are
traded every day. People from all walks of life are investing in stocks in
the hopes that they will increase in value. Some people work with short
sales or other options that focus on the market falling in value. The
diversity of the market is one of its biggest benefits and there is
something to interest everyone.
It takes an expert to know how to play the stock market and do well.
Only the best and most seasoned traders can consistently find stocks that
will be more likely to perform to their best potential.
This guide is to explain how the stock market works and how you
can identify stocks of value.
What Makes Stocks and Options
Different?
Stock trading and options are among the best investment opportunities.
Many brokerage firms offer both of these services for investors. What
are the differences between these two investment opportunities?
A stock is a fraction of ownership in a particular company - how
much of something you own at a given time. You could own as many
shares of stock in a company as you can afford.
An option is not an actual form of ownership but rather a right to
own or trade a certain investment. With an option, you have the right to
buy or sell a particular stock at a certain value within a specific time
period.
Intrinsic and Derivative Values
A stock’s intrinsic value refers to the actual value of an asset or
company. The value relates to how much confidence people have in a
company and how well that group is growing. It might also change in
value due to news stories or other reports surrounding the stock.
An option is based on the derivative value - the value of the security
at a specific time. An option’s value is influenced by the price of the
stock and simply adapts to the changes in the stock.
Long or Short-Term?
There are no real rules as to how long you have to hold an option or
stock. However, options have an expiry date. That is, an option will have
to be exercised within a given time. You can set the specific time period
at which the option will expire, thus allowing you to execute a purchase
or sale at a certain value at that time period. You can keep an option
running for as long as you want. Some options last for an hour. Others
could go on for a few days or even a few weeks. Knowing how to choose
the right timing for an option is vital to your strategy.
Stocks are different in that you could hold them for as long as you
deem necessary. Day-traders often trade stocks many times in the course
of a day. This is interesting when you consider the potential for a stock to
increase in value over the long-term. For instance, the Home Depot
(NYSE: HD) had its stock trading at around $80 during the start of 2014.
As of February 2018, that stock has a value of a little more than $185.
Day-traders still benefit from changes in the value of a stock within a
day. In a typical day, that same Home Depot stock could start at $185

Mastering Stocks: Strategies for Day Trading, Options Trading, Dividend Investing and Making a Living from the Stock Market by Michael K. Brown