Stock Trading Strategies
In this article, I will talk about the different strategies that anyone who is going into stock trading can use. Before I start, this post is meant for people who already know what stock trading is, what stocks actually are and the stock broking services. With that being said, let’s get started with the first strategy which is…
1. Using Changes in Dividends Policy for Huge Gains
When you invest in the stock market, you basically own a portion of a company. The company will then pay you in the form of dividends. Now, every organization has a different policy and you can actually leverage this to your advantage.
To do this, you have to look into dividend safety by looking to invest in a well-established company with a good cash flow.
Next, you can focus on either getting dividends that promise high yields or ones that have higher growth rates. For the former, you want to invest in a large company that has a considerable cash flow when it comes to paying dividends.
The latter is where you go and buy stocks from a company that offers a below-average dividend payment, but one that is so promising that their organization will grow in a matter of 5 years or so.
2. Build a Stock Position Using Put Options
Ever thought of having one company pay you to buy their stocks? There actually is such a thing and it is called writing put options. For the people who do not know, Put Options are trade options where a company agrees to sell some assets for a fixed and agreed upon price on or before a specific date.
Suppose that you will only buy shares at $25 and the current value of a stock is $30, you can write put options by getting a bank or any other investor to buy those stocks, and they, in turn, will give you a premium that will act as an insurance.
No matter what happens, you get to receive the full payment of the shares. So whether the price of the stock drops to your desired amount or not, you are required to buy those shares, but it will again be bought out by the investor of your put option.
3. Invest in Bad Companies to Make Money
This may sound counter intuitive, but you can actually earn some profit by investing in bad companies. However, do not just go out there and put your money on just about any company or industry you can find. The trick here is to put your chips on a “bad” company or industry sector which you think will have a huge turn around in the coming months or years.
In other words, invest in a sector where there will be huge changes in terms of the fortunes that the particular companies in that industry will experience.
4. Put Risk Arbitrage to Good Use
Some stocks are risky, especially if they will be a part of a merger or a new owner is going to acquire it. However, in these times, you can buy their own stocks (for relatively cheap prices) and you can sell them to would-be investors.
Risk arbitrage is an investment scheme where you can earn money by purchasing stocks from a company that is about to experience a takeover.
It can be risky in the sense that no one might buy it, but if the company is going to experience some growth in the future, then many people would buy those shares from you.
Again, due to its risky nature, beginners should never do this kind of thing, otherwise, you run the risk of losing a lot of money.
5. Use Cash Carry to Buy Stocks
There is this concept known as Cash Carry which essentially just means that you’re going to buy stocks using borrowed money.
Only do this if you know that the value of the stocks you’ve acquired is going to yield greater profits. Failure to do this will result in a huge debt obligation that you have to pay.