| This article teaches what a stock option is and how | | | | overall market is going down you may still have good |
| to profit through stock options investing. This is key | | | | fundamental and technical reasons to be buying calls |
| #7 in a series of 10 keys to successful stock options | | | | in that particular sector or stock. Always double |
| trading. | | | | check the news sources I mentioned in Key #2, |
| Again welcome back to my series on how to trade | | | | check the fundamentals explained in Key #3 and |
| stock options successfully. Key number seven is | | | | check the technical reasons for entering a trade |
| always trade with the trend. Let’s discuss | | | | covered in Key #4, if all of these factors combined |
| what that means. | | | | determine a good trade then by all means take into |
| As my first mentor, Dr. Stephen Cooper, says | | | | account the overall direction of the market but do |
| The trend is your friend. Generally, when the | | | | not let it stop you making the trade. |
| overall market trend is upwards then trade calls, | | | | When trading it is imperative that you don’t |
| when the overall market trend is downwards trade | | | | just take any one factor into account when deciding |
| puts. Why buck the trend? Keep it simple? | | | | to place a trade, always ensure there are at least |
| The general market direction is determined by what | | | | two good reasons for entering the trade and make |
| the institutional investors are doing. Institutional | | | | sure there are no reasons not to trade. Remember |
| investors are large corporations such as investment | | | | overtrading is a common mistake if there is not a |
| banks, mutual funds and insurance companies. These | | | | good reason to trade then just wait until another |
| corporations have billions of dollars to invest in stocks | | | | day, the market is constantly providing good |
| and when they invest or devest it moves the | | | | opportunities to make money, have patience and |
| market. Small private investors such as us have very | | | | wait for the right one. And remember, the trend is |
| little effect on the direction of the market or a | | | | your friend! |
| particular stock. If these corporations are investing | | | | Until next week, happy trading. |
| their millions into the overall market or particular | | | | US Government required disclaimer: Options involve |
| stocks then you should follow them. They may not | | | | risk and are not suitable for all investors. Prior to |
| necessarily know what they are doing but they do | | | | buying or selling an option, a person must receive a |
| make the market so if the Dow Jones Industrial | | | | copy of the Characteristics and Risks of Standardized |
| Average is down 200 points as a rule don’t | | | | Options. Copies of this document may be obtained |
| buy calls, conversely if it is up 200 points, again as a | | | | from your broker, from any exchange on which |
| rule, don’t buy puts. | | | | options are traded or by contacting The Options |
| Of course these are general rules and there are | | | | Clearing Corporation, One North Wacker Dr., Suite |
| always exceptions. A particular sector or stock may | | | | 500 Chicago, IL 60606 (1-800-678-4667). |
| be performing exceptionally well and just because the | | | | |