| This article teaches what a stock option is and how | | | | kept taking your money out your total return would |
| to profit through stock options investing. This is key | | | | be $10,000 or $4883 (50%) LESS than if you had |
| #8 in a series of 10 keys to successful stock options | | | | kept saving your money and reinvesting it. The |
| trading. | | | | longer you leave your money in your account the |
| Welcome back, this week is week number eight out | | | | more pronounced your returns will be and the |
| of the ten part series on how to trade stock options | | | | greater the effects of compounding will be. |
| successfully. In this article I will discuss saving. | | | | Einstein once said "Compound interest is the 8th |
| Savigs is one of the most critical parts to any | | | | wonder of the world". When applied to options |
| successfuly financial strategy; if you spend your gains | | | | trading we can replace the word "interest" with |
| as soon as you have them you will never reach true | | | | "return on investment". That means if you are |
| wealth. It is only by the miracle of compound interest | | | | winning and have a good return on your investment |
| that your gains will truly turn into a fortune. | | | | don't take out the profits in your account to spend |
| Compound interest is the process whereby annual | | | | on a new boat, car or house. Re-invest your profits |
| returns are added to the original investment and | | | | and if you are doing everything correctly the miracle |
| reinvested, rather than being spent or taken out, | | | | of compounding returns will exponentially increase the |
| thereby creating a larger amount to invest again, as | | | | size of your portfolio. |
| this process is repeated the compounding | | | | This is only a short article this week. Next week we |
| exponentially increases the returns over the lifetime | | | | have a lot to discuss when we talk about money |
| of the investment. For example if you invest $10,000 | | | | management. |
| a 20% return increases your portfolio to $12,000. A | | | | US Government required disclaimer: Options involve |
| 20% return on that increases your portfolio to | | | | risk and are not suitable for all investors. Prior to |
| $14,400, 20% on that is $17,280, 20% on that is | | | | buying or selling an option, a person must receive a |
| $20,736 and 20% on that is $24,883 which is a total | | | | copy of the Characteristics and Risks of Standardized |
| return of $14,883. | | | | Options. Copies of this document may be obtained |
| In the next example let's assume after you made | | | | from your broker, from any exchange on which |
| your 20% return you took it out and spent it. Your | | | | options are traded or by contacting The Options |
| next 20% return would only be the same $2000 | | | | Clearing Corporation, One North Wacker Dr., Suite |
| because your initial investment is still only $10,000. If | | | | 500 Chicago, IL 60606 (1-800-678-4667). |
| you consistently got the same return as above and | | | | |