Profiting From a Stock You Don't Even Own

Many people even in this "enlightened" era, do not realize that you can make a lot of money if the market is falling. Well the fact is that you can, and there are 2 good ways to do it. One is to "sell short" and the other is to buy options called "puts". Today we want to look at the short selling game and try and give you some advice on how it works.

Selling short is not a new idea. It has been an acceptable practice since the beginning of the market. In fact after the crash of 1929, there was a remark people would use quite commonly. Have you ever heard the old term "hey don't sell him short"? Its a very old saying and the idea behind it is if you think someone is going to fall short of the mark, or miss the boat, or what have you, you would "short sell him". Why? Because if it comes true and the target did indeed fall or stumble, you were right. Well the term comes from the stock market. If you think the market or an individual stock is going to fall, you can short sell it and if you are correct and the stock falls, you will make money.

So, how can you make money on a stock that is falling apart? Quite easily, you simply sell it before it falls, and buy it back cheaper later. The difference between the two is pure profit. Suppose you think the XYZ company is ripe for a fall. They have been running up too fast and you feel that one of these days it's going to really see a pullback. You would call your broker and say something like this: "I would like to sell 500 shares of XYZ short please". Now let us suppose that XYZ is trading at $75 when you "sell it". Now lets also say you were right and it falls down to $65 the next week. At that point you would want to "cover your short sale". How? By buying the stock back at the lower price. So you call the broker and say: " I would like to cover my short sale in XYZ at this time." The broker would then buy back the shares you sold on the open market and the difference between where you sold the shares at and what you bought them back for (in this case $10 per share) is your profit on the trade. Thats it!

Where did we get the shares to sell in the first place?? Your brokerage literally "loans" them to you. When you called to say I want to sell the shares, they take their own stock holdings and loan them to you. So when you sold them, you were selling something you did not own. But because you borrowed them, eventually they will have to be replaced and that is what happens when you "cover". Basically you are replacing them. So the way to look at short selling is this: You borrow the shares at the current market price and sell them, basically saying to the brokerage, IOU 500 shares of XYZ. In our example XYZ was at $75 when we sold them so we took in $37,500. Then when XYZ fell to $65 a share we decided that was as far as as it would fall so we literally "bought them back" on the open market. So it cost us $32,500 to buy them back and replace what we borrowed, but there is a difference of $5,000 dollars between the two transactions and that money is yours! You sold shares you did not own, took in money, bought them back lower and made a very healthy profit doing it.

Well like everything there is risk involved. The risk in shorting a stock is that it might not fall like you thought. In fact it could go up! That is the problem. When you borrow the shares from the brokerage, they have to be replaced, and if the stock rises instead of falling, you are going to have to buy them back for replacement to the broker at a higher price than you sold them at meaning you lost money. This has to be avoided so it is important that the stock you short has every reason to fall.

Shorting is indeed a useful tool. Every day, stocks go up and stocks go down and only playing the upside limits your profit potential. To keep your risks at a minimum, remember these points: First, keep your short sales very quick in duration, do not sell a stock short and forget about it like its a long term hold. Try and align a poor market day with your short sales. In other words do not short a tech stock when the NASDAQ is gaining 50 points every day. Wait for the overall market to go into a dive and chances are your individual stock will fall too. If you can align a stock that has a "reason" to fall with a very poor market day, its possible to put many dollars in your account even on a one day trade.

With a run up in the market there are definitely going to be days when traders lock in profits and the market will be pulling back. Going short on a day like that, in a stock that is weak, or just missed earnings or what have you, will net you very good returns. Learn how to use this tool, and if you are not sure abut it, try "paper trading" for a while. Write down what price you sold at and what price you "covered" at and as you get better at the mechanics, then try your first one using real money.

Now we want to explore the other most common method of capturing profits in a falling stock.

There are options available that are called "puts" and puts are used when we think a stock is going to lose value. First what are they? They are options and you do need to know a bit about what they are. In their basic form, an option gives you the right but not the obligation to do something. In the concept of buying a put option, we are buying the right to sell a stock at specific price, within a specific time period. Why is that important?

Lets look:

Suppose you think the XYZ company is going to fall like a rock. They are trading at $50 a share now (say January), but you think they will be about $45 in no time. Well we can buy a "put" option against it. In our example lets say we buy the January $50 put and they cost us $2 each. (options are bought and sold in blocks called "contracts" with 100 "shares" to the contract, so we would be buying one contract of puts, for $200) that means we are indeed betting the stock will fall and if it does we will be rewarded. So how do we get rewarded? Like this: Remember with a put option you are buying the right (but not the obligation) to SELL a stock at a particular price. We have bought the right to sell XYZ for $50 per share until the 3rd Friday of January (all options expire on the 3rd Friday of the given month). Well, if we are right and XYZ is only trading at $44 by that Friday, we have an interesting situation here. We can sell XYZ for $6 more than they are trading for on the open market. We bought the right to do so, but that isn't the fun part. The fun part is that those options that we paid 2 dollars each for could be worth $7 or $8 each at that point! This is the beauty of option trading, the huge returns you can get if you're correct in your assumptions.

So, buying a put on a falling stock is a very good thing to do because if it keeps falling, your put option that you just bought is going to be worth a lot more shortly. Then you simply sell the option that you bought and pocket the profit. We know that one day there is going to be a pull back and knowing how to short the market or buy puts becomes extremely profitable.

More on Shorting

When the market is going through some major convulsions, the concept of shorting individual stocks naturally comes to mind. One thing that must be kept in mind and that is, you have to be very very careful when you are going to short something simply because companies are so aware of their stock prices now. Years ago a company could let their stock "ride" but now shareholders are quick to instigate lawsuits if a stock underperforms. So we like to see long trend down turns in the overall market before we short individual stocks simply because a company can and often does release news just to prop up its price. If the news is significant enough, it can quickly turn a falling stock into a rallying stock and that gets ugly if you are short. So, one thing to take into account is that you should monitor your short sales very closely.

One thing that often works as a timing indicator for when to short a stock is the exact opposite of the "10AM" rule, Or "gapout" rule. Here is how it works: If a stock opens weak and falls for a while, at some point it will settle out and probably turn back up for a while. Then if it is indeed going to be weak on the day, it will start falling again. We have found that if the stock falls below the price level it fell to during that first half hour, it will probably fall further. For example, let's say we think ABC is going down today and sure enough it opens at 50 and slides to 47 by 9:45. then it bounces up a bit to say 48 1/2 , but it cannot hold and back down it goes. If it falls below that first half hour low of 47, even by 1/2 a point, chances are great that it will continue to fall on the day. If you were considering shorting ABC that would be about the safest time to try it because it obviously couldn't even hold the first plunge price.

Does this method always work? No, nothing in the market is ever a guarantee, but as far as a "safe" way to try, it's as good as it gets. One other note we would like to express is that we often like to do short sales on a "daytrading basis" or in other words, if we are profitable on our short sale, we take the profit home that same afternoon. Again the thinking being that overnight they can brew up a decent press release and the next day the stock could gap up a bunch and leave you with no profit. Years ago, CEO's didn't take nearly as much notice of their stock price, but things have certainly changed. Now they need a strong stock price for a multitude of reasons. One is lawsuits, but they also leverage their stock price as a way of generating usable capital for expansion or rebuilding. So, we find it safest to treat shorts as a daytrade or a very short term hold at the very least. Naturally there are companies that just swan dive and keep going down, but if you watch, for the most part you will see them doggedly try their best to reverse back to the upside. Play your shorts quick and consider the downside "gapout" as a good entry point, we think you will find it useful.

By Larry Potter

Adsense Ways to Make Money that Every Writer Should Know About

Top Adsense earners usually jealously guard their Adsense ways to make money and the secrets they might want to reveal, they will only sell at the maximum possible price – like valuable keywords.

You cannot really blame them because most of have gone though hell and lots of difficulties to arrive at their highly successful and effective ways to make money, which give them thousands of dollars on a monthly basis from AdSense.

This writer has been using his journalistic investigative and research skills to continuously find some of these closely guarded secrets that are being used by top Adsense earners. And even as they help me multiply my Adsense earnings, I do not mind sharing them out to others. Let me be quick to add that you can be sure that I still end up profiting in many ways, so this is really not an entirely selfless thing I am doing here. That’s the really wonderful thing about the net, if you take your time to figure out stuff, you’ll always be able to find a ways to make money from virtually everything you do.

1. Ways To Make Money In The Power Of A Safe list To Get You Clicks

The first time I tried distributing articles through safe lists and article announcement groups to pull in traffic to my AdSense sites, my daily revenue shot up three times. Recently I stopped for a while just to test the impact since I had introduced a lot of other ideas and ways to make money from Adsense, since. My daily clicks and earnings fell like a stone back to where they were.

Yahoo groups is a good place to start. Ensure that you join groups that are as relevant as possible to your subject area. This is easier said than done because most groups are fairly general. My advice is that you carefully view recent articles and submissions at each group before you join.

Do not make the mistake of using your main email address for this because you’ll get tons of emails. Instead register a totally new email address for this. Do take time to quickly glance at the email headings you receive and maybe to open one or two that strike your fancy. This will give you new ideas and also remind you how competitive safe lists are and the sort of headlines you need to get your mail opend by as many people as possible.

You should remember that you will have to churn out articles fairly regularly to keep your safe lists well fed and the traffic flowing to your Adsense sites. You will need a minimum of 5 articles a week.

2. Ways To Make Money By Generating Traffic Using Referral Marketing

Most people do not have any long term or medium term strategy for building up traffic to their Adsense sites. While valuable keywords are important, the truth is that the vast majority of clicks will earn you a couple of cents and maybe a dollar once in a while. So the only way to dramatically increase your earnings is to increase traffic.

Despite what people say about viral marketing sites, I still find that they make a lot of sense as far as the principles of effective online marketing go. The net is really a very powerful tool for viral marketing where you can do only a little and trigger off a viral effect that will give you millions – more so when you are talking about traffic and hits to your site.

At my blog I have listed the name of my favorite viral marketing site.

Even if you do not like my viral site idea, please ensure that you have a medium term and long term strategy for building up the traffic to your Adsense site.

3. A Valuable Keyword That Is Not Relevant Is Not One Of The Ways To Make Money From Adsense

There has been a lot of emphasis on valuable Adsense keywords in recent times. In my opinion many folks have gone overboard with them. It is important to note that the only keyword that will help you are the ones that are closley related to your site. The more relevant the valuable keywords are to your site the better.

Finding a clever way to use a valuable but irrelevant keyword at your site is not one of the ways to make money with Adsense. The reason is simple. The visitors you attract will not be interested in the keyword as a subject and are therefore unlikely to click on it.

So what is the secret the high Adsense earners use here? They actually narrow the focus of their valuable keywords search to keywords that are as closely related to their subject as possible.

By Christopher Kyalo

Good to Know Stock Trading Information

Stock trading is a complex process that may be quite confusing and deceitful to a new trader. Therefore, if you plan to start investing your money in shares, you should first choose a stock trading strategy that is most suitable for yourself.

The major difference between stock trading strategies is based on timeframe. It means that an active day investor will act and react differently than a long term trader. Any stock trading strategy has its own pros and cons so analyse them carefully before starting investing your savings in stock shares.

The day trader is an active player; he is always buying and selling shares inside the timeframe of a day. This kind of stock trading has to advantage of saving you the trouble of facing any overnight risk. If a share’s price is experiencing a sudden rise or drop, he can immediately take advantage of the situation. A day trader is usually targeting to get quick profits while facing small risks. The bad thing about this type of stock trading system is that it is very time consuming, you have to be permanently alert and focused on the stock trends. But the trading costs represent the worst thing. The commission tends to be very large when you sell and buy several times a day.

The swing trader is an investor who is focusing on longer periods of trading, meaning a few days or even weeks. This method has the advantage of having few commissions to be paid and the opportunity to experience some important changes in share’s price. The main downside of this method is its higher risk due to the longer trading period.

The long term swing trader is an investor much alike the swing trader above. The difference between these two is the longer period of time, several weeks, he is targeting. This method has a good aspect: the long term swing trader is avoiding the inconvenience of being affected by minor trading swings. And the profit is bigger; experienced traders target even a 50% profit using this method.

But bigger profit brings bigger risks; you will be trading over a longer period of time, therefore you will be exposed to bigger trading risks. And it is likely for you to miss many short-term trend changes.

The buy and hold trader is the investor who is buying stocks and hold them for a very long period of time, even for years.

This type of stock trading can bring you a very good profit with a small effort. But be careful when you choose to use this method as it may turn against you if you don’t have a good, strong investment strategy. This means that the secret to earn money out of this method is not just holding to the stock and hope for the best, but to analyse the stock trend, the market evolution and to set a profit target.

In conclusion, there are methods of stock trading for any type of person. You just have to analyse every type of method and use the one it represents you best. And remember that making profit on the stock market requires brains, instinct and luck!

For a Stock Trading system and investment strategy that is simple and easy to follow just visit http://www.mytradingsystem.net Portfolio management strategies that work in all types of stock market.

By Ispas Marin