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Stock Options

from porceleindoll - Saturday, July 16, 2005
accessed 1758 times

I'm exploring stock options and want to start the game.

Anyone here have experience with it? I'd appreciate some direction about stuff to read and study before I begin. What brokers do you use, how much you pay per transaction, your guidelines for selling, how you research the option and make your choice to buy it, how do you judge when to sell it, mistakes and successes, etc.

Do you have any particular strategy, what about taxes on profits, how do you pay those or handle them? Thanks!

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from Audio
Sunday, July 17, 2005 - 05:36


Well first there are a few questions, are you looking for a long term investment, a quick money maker to cash out, an IRA account or education?? Plus do you want trade on-line or through a human broker?

If you are looking for info on "Stock Options" (which means the company you work for is paying for the stocks, which is usally an addendum to your retirement plan or given as a raise/bonus) then your company will tell you which stocks they are buying for you or will tell you which stocks you can choose from and there is no tax penalty because it is work related and usually not taken out until retirement. they will already have a broker and you will not pay any fees.

Right now I invest in what are called ETF( Exchange Traded Funds) funds. They trade like stocks, but do not have capital gains tax. You only pay Capital Gains when you cash them. For Dividends most brokers let you enroll in dividend re-investment to avoid taxes. I go through The commision for monthy or one time investments is $4 per stock/EFT. If you trade in real time and not just once a month, the fee is $15.00. The minimum to sign up for an account is only $50. Which is good for those of us who don't have $2500 to open at many other brokers. Also, as I am sure you are finding, to invest in Mutual Funds you need to buy a certain minimum amount ( Usually 1000) in one fund at a time. That is why I like the EFT funds. They act like the mutual fund but you can buy less ( like a stock). They are really index funds. Which means the profits are based on certain market indexes. I'll give you an example from my portfolio I have 4 ETF funds. The Ticker letters I will give as well.

VTI ( Vanguard Viper market share) it follows the NYSE
EFA ( IShares European/Asian Market Fund) follows European and Asian Markets
IYR ( IShare Dow Jones Real Estate) Follows the Dow Jones Industrial Average in the real estate market.
AGG ( Lerhman/Aggreate Bond..Us Bond Market) Just like it says it is a bond fund, and is a good soild bet for any portfolio. It is good to have a fund/stock that will remain rather constant. By that I mean, you put $10 in and you will pretty much keep your $10 plus maybe a little more.

I am more than happy to keep going on and on. But before I go on too long about things you don't need to know I will stop. Feel free to e-mail me or leave messages here. I know a few things or two on investing. It is very important to get investing. I recommend everyone do it. Even $100 is better than nothing.

In the mean time to do research on ETF/Stocks/Mutual Funds go to for any prospectus and charts on a stock or fund. Plus
Vanguard, Fidelity, Schwab, Harris, Ameritrade, and E-Trade, Sharebuilder, Arcaex, to check out their on-line trading or personal brokerage prices, commissions and fees. You can also research on their sites and see what they offer.

Hope that helped a little ( or made you more confused) Like I said, I am here to help. Any finance questions, throw them at me :)

(reply to this comment)

From A helpful link
Wednesday, July 20, 2005, 10:36


I especially like the bit that says: "if you invest a certain amount each month or are on some sort of automatic investment plan, ETF commissions would kill your investment"

Granted, you're only paying $4 a month, but there are regular mutual funds that don't even charge that for their automatic-investment programs.(reply to this comment
From Audio
Wednesday, July 20, 2005, 11:10


I don't pay $4 a month, there is no fee. The $4 is a one time commission on the purchase per stock ( only when you buy, not sell). Then when I sell it is a $15 fee per stock. That is why I went to sharebuilder. I use Vangaurd for my Mutual funds and their fee is higher.

I still think for first time investors without $2,500 to $3,000 to invest in an index fund or no-load fund that an ETF is better than nothing. I have both, ETF and Mutual Funds, and lately I have been very happy with the ETF funds. But that is just me. But thanks for the web site info!

Happy Investing!
Jen(reply to this comment

From Audio
Sunday, July 17, 2005, 06:26

Also one more site that I like is Motley Fool. They have real good information. I am sorry if my post sounded preachy ( after reading it back I look like a jerk!) I wanted to make it general for other readers. You sound like you know what you are talking about. What stocks were you considering? I am not a big fan of buying and then quickly selling. That is why I tend to buy funds versus stocks. Plus the less headache involved in taxes and bad trades and fees. Maybe I am lazy :) I recently (about 6 years ago) bought Polaris stock (the snow mobile company) I bought at about $20 and my goal was when it hit $50 to sell it then re-invest in a mutual fund. Which it did last year and I invested in ETF's instead. This year I have had a 16% return on the ETF's which is pretty good. Last year I did not invest, I had the money sit in a money market account while I investigated the ETF funds. My other tip is to buy either right before or right after a stock splits. It can sometimes double or triple you stock holdings.(reply to this comment
From porceleindoll
Sunday, July 17, 2005, 07:38

No, not preachy at all, you sound like you know what you're doing. Thanks for the great advice. I do have a portfolio, which I started at buy and hold. I wanted to switch to sharebuilder after B/H instituted a small monthly fee, but being overseas it was proving rather complicated. Besides, I get 2 free trades/month with that fee, so it's not a bad price ($6.99). I am of course interested in the long-term, and feel I have some good stocks in the portfolio, but can always add a few more, I don't really set a selling price on them, I just planned to buy and hold onto them for as long as possible, unless something really bad happens to the company. I do want to invest in an index fund though, perhaps a high-dividend yielding one, but I haven't yet researched it.

By options though I mean the whole thing of buying the option to buy the stock, the option to sell the stock, which is more along the lines of the game of the stock market vs. the long-term of it. I have a friend who is really doing well with it, and I've decided to give it a shot, but would really appreciate a starting point for studying and researching. If you had any sites or books or direction to point me in along those lines, I would appreciate it very much.

I basically taught myself all I know through the Motley Fool, most of the stocks I have are through their recommendation, and only once was I truly disappointed. But they are the long-term holders and that's what they promote, which was great and still is great for me, but now I want to explore another investment possibility.

From what I understand you can't lose more than what you pay for the option, but your gains can be very high, there's no real limit, but I'm sure you have to know something about what you're doing.

Thanks for any advice or whatever you may have to say!(reply to this comment
From Ne Oublie
Sunday, July 17, 2005, 09:18

From what I hear Options are still pretty widely traded in the US, but in the other markets they have gone entirely out of fashion. Another major difference between the US & European Futures markets is that ours have moved primarily to online trading, whereas the CME is still driven by pit traders. The difference being that screen traders are able to take a far more technical approach to their strategies because of the additional tools they have at their disposal.(reply to this comment

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