Introduction to Renting Shares on the Stock Market
By: Paul Simos
Renting shares or dealing in stock options serves as creating a contract between two individual parties, one who acts as the buyer and another who acts as the sell. The stock option gives the buyer the right to exercise a contract either before or following a specific date in the future. This date is known as the expiration date, or the exercise date. This contract will allow the buyer to sell any underlying stock at a previously determined price.
So for example, if you want to get into renting shares, here is one way that you can look at the process: If you choose to purchase a stock option for a specific company's shares for the amount of $10 per share, then you will be allowed to purchase more shares of that same company for $10 any time in the future as long as the contract is still in tact. What this means is that even if the company's shares go up significantly in price, as long as the contract is still in tact, you can continue to buy the shares for the original price.
This provides an excellent opportunity for you to diversify your portfolio and to make some good money in the process, just by renting shares in the options market. If the stock you invest in is trading at $100 in the future, and your contract is still valid, then you can continue to buy it at $10 per share, making a very nice profit in the process. Renting shares in the options market is not the same as simply buying and selling the shares themselves. With renting shares or options trading, you are actually selling and buying the right to buy and sell at a specific price rather than the actual shares their own selves.
When it comes to renting shares in the United States, stock options most commonly expire on the third Friday of each expiration month. Renting shares contracts are based on the underlying stock, which is why they are generally regarded as derivatives. In the same way that warrants and futures are being looked at as asset classes, renting shares in the options market is also being looked to as an asset class because of the act's potential for hedging and leveraging portfolio profits.
Renting shares offers similar options contracts to what you may find in ETFs, Forex, Commodity trading, index trading and real estate investing. Every single financial asset that can be purchased or sold can have options written for it or shares rented between the potential buyers and potential sellers. There are two different types of options that should be considered when renting shares: The first are put options, the second are call options.
Put options give the people involved in the contract the right to sell an asset at a specific price to the holder. On the other hand, call options grant the right to the holder to buy that same asset at a pre specified price. When the holder in either of these cases exercises their right, this is regarded as exercising the option.
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Hello my name is Paul Simos and I am the owner of Applied Wealth Strategies. Our business is to help and educate people who are interested in becoming financially free though various wealth creation strategies. We work with and are associated with many people who are living proof that these strategies work. Click on the following link to find out more: www.appliedwealth.com
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