Okay, so if I haven't scared you so far, talking about using leverage via options - let's carry on.

When you read my ebook you will see % figures, that like following example demonstrate difference in movement of stock prices versus option prices.

If you have not invested in a trading package you can do so by going to link below:

http://www.tutorhelp.com.au/sharemarket.html

Now let's move on.

If you buy stock XYZ at $37 and price increases 12% to $41.50 you are using lots more of your precious money to capture move than if you purchased say a $35(strike priced) option for $3.50 per option.

Now each contract in U.S. represents 100 shares. So your total cost is $350 per contract. In Australia one contract represents 1000 shares.

If your stock goes up it will influence option price. Options can be extremely volatile - so you need to monitor prices very closely.

So let's say your stock goes up to $41.50 and now $35 option series is selling for $6.50. This represents an 86% price increase.

So what has happened:

stock up 12% option up 86%

Which trading situation do you think will make you biggest trading profits?

Would you rather hold option or stock?

If you answered "the stock", I'd be very worried about you!

Drawbacks of Options:

1. Volatility - needs close monitoring. 2. You can lose your option money if you don't sell it before it expires. 3. Short life of options - usually months. 4. You need education in option trading.

Advantages of Options:

1. Leverage. 2. Volatility - can make more money per trade. 3. Less money needed than owning stocks. 4. Play market UP or DOWN - flexibility.

If you increase your understanding you could do what every other trader is doing - making money from time to time!!

You see losses are part of game - not all your trades will succeed.

Playing game with this fact in mind will help you to trade better and to have a healthy respect for market and controlling RISK.

We control risk firstly by being educated! I've chosen this link because I think it will help you understand and trade options so much better.

http://options-university.com/go.php?3440_A72092_21175

Regards, Joseph Sgro THE 10 Simple Rules Ezine http://www.tutorhelp.com.au/ezine.html

Joseph Sgro has spent 18 years as trader. He is also a writer and educator. He has recorded his trading experiences and offers "Learn to Trade" information. Visit the BLOG: http://www.tutorhelp.com.au/BLOG.html

For more resources go to: http://www.tutorhelp.com.au/resources.html

The theory is that sooner or later these stocks will once again have some sort of news event that will move them to upside. As soon as that news hit, I would be in an excellent position having already bought stock at a recent low. I would then try to buy an additional half lot or a full lot once new news event hit street. Overall, I would be in shares much earlier on average and be able to take advantage of move and sell for a profit into momentum. Being in stock gave me ability to lock in a nice profit without having to scramble to get in and scramble to sell before momentum ran out.

Often, I would be in stock and news would hit over night, causing stock to gap up significantly at market opening in morning.

However, this is not called “The Crapolio” without a reason. High quality stocks do not usually behave this way to same degree. Those that do are much more expensive, usually $35 or more, making it cost prohibitive for all but wealthiest traders to use this plan.

As previously mentioned, most, if not all, of these stocks were under $10 and for a reason. These were not high quality stocks; in fact, opposite was case. Most were high-risk speculative tech stocks or bio-techs. Many were dot-coms; remember this was in hay-days of dot-com boom. As we all know now, there were a lot more dot-bombs than there were successes.

Obviously, this was my own version of Swing Trading.

IT IS IMPORTANT TO UNDERSTAND THESE WERE "NOT" BROKEN DAYTRADES. Each stock was chosen, charted and watched over a period of time before it was added to “The Crapolio”.

I believe this strategy could still work today. However, it is to be considered extremely risky and should only be used with money you can afford to lose.

When trading this or any day trading strategy one should know and use DTM: Decisive Trade Management (see story at http://www.traderaide.com/index.html).

Happy trading!

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