If you’re looking at ways to increase your business income through an investment strategy – or even as a way to gather sufficient fundings and launch a startup business using effective investment approaches – it’s likely that you’ve figured that the most effective way is to sell your stock for profits. The most common solution for new investors is to buy a stock and sell calls against it. However, it can be difficult to implement as a strategy as it relies on the availability of capital. Indeed, to sell a call you need to have at least a minimum number of stocks – 100 – which can be tricky to afford if you don’t have the financial means to do so. It’s therefore fair to ask whether there is a low-risk alternative to buying stocks to grow your profits from the investment market.
Selling options for your stocks
First of all, if you’re new to the idea of using calls to sell your stocks, you need to understand one key factor of your investment strategy: What are covered calls? A covered call in an options strategy that involves buying or owning a stock and selling call options, and waiting for the options contract to be exercised. If you’re looking to gather funds from this strategy, you need to focus on collecting your income via option premiums. It’s a demanding strategy that requires available capital and understanding. Indeed, an error in this trading approach can be costly. Investors who sell at the wrong strike price or who let the contract expire may find themselves out of pocket.
The poor man’s alternative
If you prefer to make the most of the investment market to generate huge returns without needing to own multiple stocks, you’ll be more interested in using a LEAPS – Long-term Equity Anticipation Security – strategy. However, in this approach, the options are available on longer terms than traditional options. LEAPS options can typically extend for terms of 2 years out. Rather than buying 100 shares, the investor can simply buy the in-the-money LEAPS calls and sell an out-of-the-money call against it towards the end of the term. The main reason for this approach is to reduce the extrinsic value and facilitate the purchase. It’s a good way to enter the market for small budgets.
Growing your investment strategy
The advantage of getting to understand some of the main stock market strategies, as a business owner, is that you can develop a feel for the performance of companies and, therefore the fluctuation of their stocks. For small business owners or startups, the ability to keep a small part of your budget and dedicate it to stock market investments means that you can not only grow your market knowledge and identify business and financial trends before our competitors, but you can also accumulate the income you need to grow your company. Admittedly, you may even decide to build a team dedicated to the management of your stock options once you’ve developed a taste for the investing world.
As a business owner, you might find the investment world a little difficult at first. But using your business acumen alongside key financial strategies, you can maximize profits through the calls you make.