Investing in the Stock Market The Smart Way [Part 3]

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December 3, 2021 Posted by George Fokas Stock
Market Investing No Comments Welcome to Part 3 of
this multi-part series of blogs where I will
teach you a better stock investment
strategy. Come back every fortnight for the next
instalment. Or, to ensure that you dont miss any
part of it, subscribe to our blogs to be notified
of updates by clicking here Subscribe to Blogs
If you have missed previous parts, please click
on one of the links below to read it Read Part
1 Read Part 2 In Part 2, we were
discussing how investing in the stock market is a
Guessing Game. We also talked about how the
worst part of the Guessing Game is the bit where
people speculate with Calls and Puts and buy
Options based on how they hope or wish the stock
will perform. However, there are two sides to
the Options market. For the buyer of an Option to
acquire it, there has to be a writer of the
Option who creates it and then sells it to the
buyer. Buyers are speculators, guessing and
gambling in the hope they get the direction
right. Writers create Options, sell them, open
their positions on the stock market with a
Credit, earning income irrespective of whether
the market or the Option goes up or
down. Covered call investors use the stock
market as a vehicle to earn income from it, every
month irrespective of market direction, just
like property investors use the property market
as a vehicle to earn income, (rental)
irrespective of whether the property goes up,
down or sideways in value. In this blog, learn
how you can be the creator of the Options to
generate a monthly income for yourself while
significantly minimising your risks. We are
getting deeper into the topic now so this blog
is longer than the first 2 but hey, you are here
to learn and we did stress the importance of
patience in the first blog, right? So read on!
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Lets Understand Options Calls And Puts
A Call option (or just call) is a standardised
contract that gives the buyer/holder the right,
but not the obligation, to buy 100 shares of
stock that are subject to the option (the
underlying stock) at a pre-determined price
(the exercise or strike price) for a set
period of time (expiry month). In other words,
for us covered call investors, we are selling
someone else the right to buy our stock at a set
price by a certain time. A Put option (or just
put) is a standardised contract that gives the
buyer/holder the right, but not the obligation,
to sell 100 shares of stock that are subject to
the option (the underlying stock) at a pre-
determined price (the exercise or strike
price) for a set period of time (expiry month).
In other words, you are selling someone else the
right to buy your stock at a set price by a
certain time if the stock drops below the set
price on or before the expiry date. If they buy
a 35 October Call Option for X, then they can buy
the share for 35 anytime before the contract
expiry date (being the third Friday in October).
If the share price goes above 35 then they can
buy it for 35 and they make a profit. If it
doesnt then they just paid for an option they
wont exercise because why buy the share at 35
if it is available on the open market for
less? A Put Option means they believe the share
price is falling or will fall so they buy say a
35 October Put Option for X. If the share price
falls below this 35, then they can sell the
shares to the investor who sold them the option
for 35, even though the share is not worth that
on the open market. Of course, these options are
traded themselves, being bought and sold many
times before they reach the expiry date. The
people who own the stock can become writers of
options, what we call market makers. Therefore
the stocks people own that are optioned are paid
for the option, the exclusive first dibs on
that stock, bought by the option buyer as either
a Call or a Put. Now we look at the other side
of the option, the creating side. We as market
makers open our positions with a credit, earning
income for the month on our stock capital no
matter what happens on the market with the
stock. The buyer on the other hand takes on the
risk, outlaying money, opening their positions
with a debit, waiting in anticipation that they
have predicted the direction of the market
correctly in the hope to make money. This puts
the risk of the option to the buyer who holds
the risk. They hold an option that decays in
value and will expire by the end of the contract
period unless they exercise the right or on-sell
it. It all depends on what happens to the value
or price of the stock over the month the option
is in force. Covered calls protect the stock
holder so regardless of whether the price goes up
or down, they make their money and have no
exposure to the vagaries of the market. They also
dont need a crystal ball or a snappy App to
determine market direction. Before we explore
covered calls in detail, lets examine why people
mostly ignore this safe, proven way of investing
and prefer to gamble with options, s and penny
stocks, bitcoin, forex, day trading and all the
other easy ways to lose your investment.
Basically, it gets back to that most human of
human natures, greed.
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Greed Isnt Good Or Bad, Its What You Do With
It Greed is one of the driving forces of human
nature. It is present in all of us to some extent
and in varying aspects. We are all greedy to an
extent about something, and greed is not
necessarily a negative thing. It is, as with
everything, what you do with it that counts. How
you apply your natural greed makes all the
difference. Some of us are greedy for a better
world and do all we can to help others while
making sure we dont do any harm, or at least as
little harm as possible. Greed is a relative of
ambition, which in turn knows determination,
motivation and persistence. Some people are
ambitious in ways that are self-centred and all
about whats in it for them. Others are
altruistic and do what they do for the good of
others. Most of us are somewhere in between. We
neither have the ambition to be in power like a
prime ministerial hopeful, nor do we want to
save the world and live in a Third World drain
pipe while helping the sick. Moderation is the
key, and there is nothing wrong with
being ambitious, or even greedy for success and
improvement so long as you achieve your
goals ethically, morally and without harming
others. Helper or Helped? One of the really
cool things about making a good living the way I
do is that I have plenty of free time to devote
to altruistic projects. I love helping other
people and I would say most of us feel the same
way. The English actor and commentator, Stephen
Fry, asked the question
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Which would you rather be. Someone asking for
help or the person able to give it? The answer
is obvious, surely? The person giving the help is
a far better position to be in than one having
to ask for help. Im not saying you should never
ask for help when it is needed, not at all. What
I am saying is I agree with Stephen Fry. It is
far better to be the person who is in a position
to be asked to help, to be able to offer their
assistance. One of the motivators behind writing
this blog is my personal objective of spreading
financial education as far and as wide as I can.
One way to spread the word is through a blog. A
blog has a certain gravitas, or weight, value,
credibility that other media may lack to some
peoples minds. That it is printed and bound,
published and distributed, and made available
for the world to read does indeed give the
information within some weight. If that
information is valid and has veracity and the
reader applies the lessons within, then it will
have made a worthwhile contribution not only to
the individual reader but also to their family,
friends and society as a whole. The results of my
members and, seeing average, ordinary people
applying the concept that we educate them with
and building another pillar of income and at
times replacing their income, inspires me to
continue on my path. On a daily basis, since 2005
I receive emails and texts from my members all
around the world thanking me and my team for what
we are doing, and this is rewarding. Being able
to generate an income through educated investing
means that you are in a position to be the one
who can help, not the one needing help. When you
have to drag yourself to work everyday to do
your J.O.B., when you are living payday to payday
and the threat of you or your spouse being laid
off keeps you awake at night you are lucky if
you can help yourself let alone anyone else. The
pandemic or plandemic seen in 2020 and beyond
has removed job security, peoples freedom,
businesses have shut down for good and
relationships destroyed. This is why now is the
time to step up and learn a better way to
generate another income and educate
yourself. Getting back to greed, the one thing
that often stops any of us from achieving what we
want to in life is ourselves and our own
limitations, fears and negativity. If you think
you cant do what I do to make a living, then
you are correct. One hundred percent spot on. If
you think you can learn how to do what I do and
then give it your best shot, you are correct.
One hundred percent spot on. Your perception is
your reality and if you tell yourself you cant
then you cant how could you not? If you tell
yourself you can then you can, or at the very
least you will give it your best attempt to make
it happen. Too often we build barriers and
hurdles for ourselves that we should never have
made. We tend to think that if we believe in
ourselves then we are being selfish and
egotistical and in effect greedy, putting
ourselves before others. The reality is if we are
unable to help ourselves then we cant help
anyone else, so a little greed, selfishness
or what have you, isnt such a bad thing. Get
greedy for success, but not for success at any
cost and at the expense of your loved ones,
friends, family, colleagues and community. How
many people have dreams, visions and goals that
they strive towards and have ideas they want to
pursue only to discuss these with family, loved
ones, neighbours or work colleagues who deflate
them as opposed to telling them to push their
boundaries, live their dreams, pursue their
goals? One of my key sayings when I teach around
the world is
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Dont allow other peoples opinions to become
your reality. George Fokas See, if those people
who bring you down with their opinions have not
done what you want to do, then it is purely an
opinion. I love how many people, who have no idea
what we teach and what we do, voice
their opinions without knowing facts. Napoleon
Hill in his Think and Grow Rich book
said, Opinions are the cheapest commodities on
Earth. Everyone has a flock of opinions ready to
be wished upon anyone who will accept them. If
you are influenced by opinions when you reach
decisions, you will not succeed in any
undertaking, much less in that of transmuting
your own desire into money. See people thrive on
negativity, they want to bring others down to
their level of ignorance and insecurity. If only
these negative people put all that energy into
their own lives to grow, they too would be
successful, however, they arent and the jealousy
kicks in and this is why, they are where they
are. Lets put you into the right frame of mind
to attract wealth and grow rich in Part 4. Click
here to read Part 4.