Rich dad option trading

Rich dad option trading

Author: usersupport Date: 05.07.2017

One of the things that makes The Rich Dad Company so different from other financial educators is that we do not tell you what to buy or what to invest in. Instead we teach why an opportunity is good and we show you how many different things there are to invest in. Stocks may make a lot of sense to most people, but certainly not all. A good investment vehicle stocks, real estate, business, commodities needs to fit with your lifestyle, your personality, and your philosophies.

There is no investment vehicle that is one size fits all. Get Rich Dad's 6 Rules for Investing in Stocks. Most people believe that stock investing is at odds with the Rich Dad philosophy of investing for cash flow.

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The reason people believe this is because they think stocks are simply buying low and selling high. An educated stock investor knows how to cash flow with the stock market, not just invest for capital gains.

The first method of Dividends is pretty direct. The second method of Covered Calls requires quite a bit more financial education.

At its core, a dividend is your share in the profits of a company you own […] In return for purchasing stock, or investing in, a company you are given two basic rights. This is paid in the form of a dividend. When the board of directors releases company results at the end of each quarter, they will also announce the amount of dividend if any to be paid per share.

So if you were to buy stocks that pay regular dividends, then you are purchasing assets that add to your cash flow. With enough assets like this, you can eventually have the income to do whatever you like, right now or in retirement. The covered call strategy is not for the uneducated.

This is going to get a bit crazy. A stock option is a promise by someone to sell a certain stock at an agreed-upon price until a certain date.

rich dad option trading

In return for this promise, he receives a premium as income. This premium is not just based on the movement of the stock price, but on the movement of time. Instead, they decide to lease the house for three years with the option to purchase the house at an agreed-upon price at the end of the lease term.

rich dad option trading

While you are waiting for the lease to expire, you are earning money on the movement of time rent. As the owner of a lease-to-own house, you will make money no matter what happens. If the house increases in value beyond the agreed-upon price, the family got a good deal but you still got what you wanted since you set the price. If the house goes down in value, the family will likely not buy the house at the end of the lease and you get to keep the house.

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This is especially useful in difficult markets where buy-and-hold investors are suffering from crazy up-and-down conditions. As mentioned earlier, an option is a promise by someone to sell a certain stock at an agreed-upon price until a certain date. I know it certainly took some time for the light to come on for me. So a few years ago I made a small trade just for the purpose of teaching. I chose to hold a stock for a long time regardless of the fluctuation in its value, just as many real-estate investors hold their rental property regardless of fluctuations in the price.

To show my students the similarities between stock investors selling options and real estate investors collecting rent, I bought an Exchange Traded Fund ETF and held it for a year.

But my goal was to prove that it is possible for a falling stock to generate income just as a house that is declining in value can still generate rent.

This is not hypothetical.

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This is an actual series of very small trades I did during the subprime meltdown of I was going to hold it for a year, come what may. After buying it, I watched it closely to see if it going up, down, or sideways.

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Since I owned the shares, I was positioned to be the seller of an option instead of the option buyer. You can see that I have set up a scenario where no matter what happened, I would generate income from an asset I had purchased. To me, this was a very attractive way to generate my own income. I bought shares and then I sold those options. Even though the stock was falling in value, I continued to sell options on my shares of the SPY month in and month out for a whole year. Because I am not much different than a real estate investor who sees the value of his rental house decline for a season.

He is receiving his rent each month and I am also receiving my income every month from options.

This income flows in even as we both wait for the underlying value of the assets to bounce back. I get to keep the stock while the time decay is bringing in cash. As we said earlier, most people think that stock investing is at odds with the Rich Dad philosophy of investing for cash flow.

However, an educated stock investor knows how to cash flow with the stock market and knows the rewards of cash flowing the stock market. How to Cash Flow With Stocks Written by Robert Kiyosaki Tuesday, September 15, Read time: What Are You Working For? Download Robert's 6 Rules for Investing in Stocks First Name RichDad. Tuesday, September 15, Written by: Latest Rich Dad Blog Posts Money and Marriage: How to Work Together.

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