The mainstream personal wealth gurus are all talking about stock options, convinced that this is a tool favored by the wealthy. While stock options certainly have the potential to create wealth for those savvy investors who know how to use them, be cautious as you search for the knowledge to use them profitably.
Robert Kiyosaki, author of the Rich Dad books, is talking about stock options. Whether you are a fan of Mr. Kiyosaki or not, he is undeniably one of today's more prolific personal finance authors in the world and he wants us to know that options are the investment of the rich.
It is not just Mr. Kiyosaki, but an entire industry that is springing up to promote options trading and service the needs of stock option traders. There are a lot of people talking about how options are the key to financial freedom and why you should learn how to trade them yourself.
Through all the clamor, it would be wise to take pause and consider whether stock options are truly the missing link to incredible wealth or simply an opportunity for savvy marketers to improve upon their net asset picture at your expense.
Stock options have been traded on organized exchanges since the 1970's. The public's eye was drawn to these 'derivative' securities in the 1980's and 1990's when large losses resulted after large funds found themselves over leveraged. More recently, with the advent of electronic trading by the International Securities Exchange (ISE), options have been re-introduced to the public in a more constructive light.
What was once a very expensive product to trade is now quite affordable. This once exclusive playground of the ultra-wealthy and large hedge funds is now open to anyone with a few thousand dollars. Technology introduced by ISE is causing nothing short of a revolution as now multiple exchanges compete for order flow.
What stock options offer the individual trader is a tool that can be used to reduce risk in a portfolio, to increase or stabilize returns, and to speculate on changes in the market without exposing yourself to significant losses. These benefits all pre-suppose that you understand how options work and that you use them intelligently and responsibly.
In other words, if you are going to venture into the world of stock options you need to spend some time learning how the successful traders play the game. This is where those clamoring voices are eager to jump in and offer their services to you; for a price.
TheOptionClub.com was established as an alternative to the high priced seminars, as an online forum for new and experienced traders to share information, and as a resource for traders to determine what products and services are worth their investment of time and money. Mr. Kiyosaki is right; stock options are an investment tool of the rich. However
, before you run from one stock option guru to the next take some time to research your options for learning about stock options.
ABOUT THE AUTHOR
Christopher Smith, B.B.A., J.D., is a graduate of the University Of San Diego School of Business and Santa Clara University School of Law. He is a practicing lawyer, an active trader, newsletter publisher, and is the founder of TheOptionClub.com. For more information about option trading, contact Mr. Smith through his site.
