How to Generate Income from Your Stocks

June 4, 2010 // 52 minutes

The Market Guys will show you how you may be able to create income from your stocks with options.

Investing Education Day

July 29, 2010 // Chicago, IL

PIN PRESSURE INDICATOR™

Using Pin Pressure as a leading indicator for setting price targets

AJ Monte, Chief Market Strategist for the Market Guys, has written a paper for the Market Technicians Association on the Topic of Pin Pressure.

This document was grounded in research conducted by the University of Illinois showing how Option Trading Volume affected the price of the underlying stock in which the option contracts where traded.

From this paper, AJ has developed the Pin Pressure Indicator™ which is a calculation that computes the combined open interest traded at various strike prices and uses this data to determine price targets for individual stocks as we approach options expiration Friday.

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1 More Options Q & A

Q:  I just recently suffered a layoff and I’m a little tired of working for someone else and moving from job to job. Is trading stocks and options something i can do for a living?  – Andrew

A:  You can trade for a living but you must be prepared to treat it like a real business.  You can’t just step in and start pulling cash out of the market.  You’ll have a period of learning where you will likely lose money. You also must have enough funds to keep you from trading scared – that is, feeling like you cannot lose any money.  When that happens, you will be much more prone to avoiding losses by letting them ride.  The best bet is to start trading on the side, while you have another income source.  Then you can make the switch when you’re confident in your ability to continue full-time.

Q: : Can you buy a put if you don’t own the stock and pocket difference if option is in the money at expiration? - J.H.

A:  You sure can!  You don’t need to own the underlying stock to trade options.  What you’re referring to is a long put trade which is similar to shorting the stock.  In both trades, you profit when the stock price drops.  You have to be careful about losing time value, though.  Consider subscribing to The Options Oracle to help you decide which option is the right one for your trade.

Q: If you sell to OPEN a PUT and you don’t want it to be a naked put, would you first buy the underlying stock or would you first short the underlying stock?  – D.D.

A:  Selling a put obligates you to buy the stock.  Therefore, in order to not be uncovered or naked, you would need to have the full amount of cash required to make the purchase in your account.  This is known as a cash secured put.  Shorting the stock does not hedge a short put position.  If the stock price rises, the short put will expire worthless but you continue to lose from the short stock position.