How To Make Money In Stocks To Pay For Big Expenses

The pandemic has been an economically challenging experience for a lot of people.

As a result, many people have considerable expenses and do not know how to pay for them, especially after lockdowns have hammered the job market. Moreover, the future for many would-be employees is uncertain. So what do you do if you cannot find remote work?

Why don't you invest all of the money you have left, including your economic stimulus checks, in the stock market? Sound absurd? Of course it is, but these are absurd times.

Stock Market

How To Make Money In Stocks To Pay For Big Expenses

The stock market is a term for several stock exchanges where shares of companies can be publicly bought and sold. For example, Control4 Austin Texas is a Home Automation company that is publicly traded and trades with the ticker symbol CTRL. At the time of this writing, CTRL trades at $23.91 per share, the stock's price. If the stock price rises after you buy it, you make money. If it goes down, you lose money.

If you wish to purchase a stock at a specific price, you need to set a limit order, but the stock might not reach that price. However, if you are not worried about the stock price shooting up within seconds of your order due to market volatility, you can use market order to purchase the stock immediately.

If you think that a stock will go down, you can sell short and profit should that happen. If the stock goes up, however, your losses could theoretically go to infinity. 

Popular exchanges for buying stocks include NYSE and NASDAQ. Popular forums for finding an investment strategy include WallStreetBets and Reddit. Popular averaged indexes of stocks include the Dow Jones and the S&P 500. If you want brokers to choose a non-customized portfolio for you, you can invest in mutual funds and ETFs. 

Options Market

How To Make Money In Stocks To Pay For Big Expenses

Options traders trade equities and other securities, but options trades are not typical stock trades. This begs the question, "What is options trading?"

An option trade is a contract. The contract allows the option buyer to buy or sell, depending on the option, security within a certain expiration date at a specific price. Let us say that the option buyer purchases an options contract from an option seller, aka an option writer, to purchase 1000 shares of XYZ stock at $100 per share by January 30. This type of contract for buying securities would be called a call option. Even if XYZ stock should go up to $200 per share before January 30, the option buyer still has the right to buy has the right to 1000 shares of XYZ stock at the original price of $100 per share, the strike price. In this way, the option buyer, aka the holder, can potentially double their profits, minus the cost of purchasing the options contract itself. The person selling the option, the option seller, aka the option writer, has to acquire 1000 shares of XYZ stock for the option buyer and sell it to the buyer at this discount price of $100 per share, even though XYZ stock has doubled in value to $200 per share. Therefore the option seller takes a loss. 

If, however, the option buyer does not wish to purchase XYZ stock, the options contract itself now has intrinsic value, and said person can sell the options contract. If XYZ stock price goes below $100, however, the options contract no longer has intrinsic value and becomes worthless. However, the option buyer is not obligated to buy XYZ stock and has only lost the price of the options contract.

If, however, the option buyer expected XYZ stock to go down, they could purchase a put option, which would allow the holder to sell the option at a specific price within a specified expiration date. Therefore, if the option buyer purchases a put option to sell 1000 shares of XYZ stock at $100 per share by January 30 and XYZ stock drops to $50, the holder can purchase XYZ stock at $50 per share and force the option writer to buy back the option at $100 per share. Again the option holder takes a profit, and the option writer takes a loss. 

In this manner, options trading allows traders to increase their buying power without purchasing securities on credit, aka buying on margin or leveraged trading. Trading stocks in its simplest form is less complicated than trading options, but both can be very complicated depending on your investment decision and market volatility.

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