Pocket Change Stock Options

Many investors feel like they don't have a big enough say in the companies that they have invested in at some point or another

. Many times this can result in the investors failing to take full advantage of any opportunities that may arise and leave them struggling to make a profit. Penny options can help you to increase both your portfolio and your leverage within the companies you deal with.

Many stock prices will usually increase in increments of either five or ten cents. Penny stock prices don't use this pricing structure, instead their prices rise in pennies. This is a good way for investors to increase their leverage is this means they don't need to put up lots of capital to get started and should the stocks fail they haven't lost a great deal of money.

Penny options offer you the chance to make a profit in a relatively short amount of time because of the small amount of money and smaller competition. Lots of people are drawn to penny stocks because you will not lose more than you initial investment. There are some drawbacks to buying options as opposed to buying regular stock. The main drawback is that penny options have the tendency to change massively in a very short amount of time. These could be for the better or the worse.

You should always to the required leg work to find out if the options you are considering will actually suit your needs. Penny stocks may be cheaper, but their liquidity may not offer you the advantages that you were after. You will need to find out what your brokerage cancellation policy is to avoid getting into trouble. You should also find out the time decay of any options before you buy them. Plan for how long you are going to keep the options for before trading them and buy options that will expire well after that point.

If you decide that you are only going to trade for one day only then there is no need to worry about the options expiration dates. In this situation the front month option will work out just fine for you. It is sometimes harder to get your hands on penny options nowadays as they are not as common as they once were. You will be playing catch up with many crafty brokerage firms and some savvy traders who already use this method.

You should always try to be patient when trading penny stocks. Penny options can move quite a lot in a short amount of time, so instead of stressing and panic sit down and relax. If you are prone to worrying and stressing then maybe trading penny options is not the game for you.

Trading penny options can give you the leverage you need at the fraction of the price it would cost for you to buy blue chips.

by: Leon Harris

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