How to invest in the stock market for beginners in 2019 David Jaffee with BestStockStrategy.com
and you can go to BestStockStrategy.com
enter in your email address to receive over $400 dollars of free
training materials that are extremely valuable. In this video we are going to
learn how to invest in the stock market and how to be a successful investor in
2019 the first thing you need to do is need to sign up for a brokerage. Now I
recommend if depending upon your account size if you have below $3,000 you can
sign up for RobinHood if you have over 3,000 dollars from anywhere between
three and five thousand dollars then you can use tastyworks and if you have over
five thousand dollars between I recommend between five and twenty
thousand dollars that you should use tastyworks and if you have over twenty
thousand dollars then I highly suggest that you Google stock brokerage or
online stock brokerage signup bonuses and you go with whatever brokerage
offers you the biggest sign up bonus some of them will allow you to trade for
free for three months others will provide you with anywhere from two
hundred and fifty to five hundred dollars alternatively if you are with an
existing brokerage you can simply call them up and ask them to honor the signup
bonuses that you see which are currently being offered and your existing
brokerage will want to retain you and they might honor that bonus and match it
the two hundred and fifty or the five hundred dollars or the three months of
free training as their retention bonus to you in any case now that you have the
account setup you want to make sure that you are able to sell naked puts and call
options if you have over a hundred thousand dollars then you can ask for
portfolio margin but the best way for for beginners to be successful in the
stock market is to sell option premium now selling
option premium is the only way that you can invest where the odds are in your
favor you don't want a day trade you don't want to get involved with penny
stocks because you are going to lose money I have been trading
for 20 years I've worked on Wall Street as an investment banker for five years
in real life I have never met a successful day trader or penny stock
trader now I know that they exist on the Internet but I'm talking about real life
with your money you do not want a day trade because you're not gonna make any
money the way that you can earn money consistently and predictably in the
stock market is by selling option premium because it gives you a
statistical advantage you are acting as an insurance company and you are acting
like the casino so what I recommend irrespective of how large your account
sizes you should eliminate all distractions and start and build up a
watchlist as far as a watchlist is concerned I like the following stocks
especially considering that right now in the end of 2018 we're in a bit of a
correction and I do believe in 2019 the market is going to correct and go down
by anywhere from five or ten percent now I can't I can't predict the future so
what I'm doing in teaching you how to make money in the stock market is I'm
assuming that the market is going to go down five or ten percent if it ends up
breaking even or going up then you're gonna make even more money but unlike
people who just simply buy a stock and hope that it goes up this is a way where
you can make money even if we're in a recession so the first thing you want to
do is make sure that you pick high-quality stocks to follow
I like LMT Raytheon Boeing McDonald's Dollar General JPMorgan and Facebook all
of these are market leaders this is defense and these have predictable cash
flows and predictable revenues McDonald's they sell food they are also
recession proof Dollar General is a dollar store
JPMorgan is banking and then Facebook I'm putting Facebook on here because
it's already down 33% so right now it's trading at about a hundred and
yeah I guess it could fall to 120 but I can't really envision Facebook
falling to around $100 but if it does I mean again I can't tell the future but
it's already been beaten down and it's down by 33% from its high of $218 so
that's why I'm putting it on there because I don't I think that you know
definitely over the past week or so it's essentially treaded water even though
the market has been beaten up a little bit over the past week so Lockheed more
and right now I was treating and around 305 Raytheon is around 181 Boeing is
around 350 McDonald's is around 185 Dollar General is 115 JP Morgan is 108
and Facebook I think is around 143 all right so what a lot of people do is
they'll just buy it don't just ask themselves they'll look at LMT and
they'll say hey earlier this year I was trading a 390 it's at 305 right now
let's buy it but that's the wrong way to make money especially when the market is
trending down what you want to do is you want to identify the local trading range
for this specific security so the local trading range for LMT is around 290 to
round around trade down the low around 290 and then the high end it's around
315 maybe 310. Raytheon the low end 175 high end around 190. Boeing, it actually fell
around 10 dollars today so I'd say around $345 on the low end high end is
around 370. MCD is actually trading relatively close to its high. Dollar
General is the same thing as its high is around $118. JP Morgan recent range
is around 105 to around 112 and Facebook has been relatively consistent in like
the $140s to around $150. What you want
to do is you want to wait so I'm gonna use LMT as an example you want to wait
for this to close or rather to trade down to $295 this is going to be your
trigger price for for RTN you're gonna wait for this to trade down to 175
bowing around 340 McDonald's around $175 and so and etc then once
these stocks you're going to ignore everything else once these stocks enter
your trigger range you are then going to sell a put so remember the current price
is $305 you're gonna wait for Lockheed Martin to trade down to 295 and then
you're going to sell a put with a strike price of around 275 or 280 in exchange
you are going to collect around $2 a premium that is one contract is 100
shares so for every contract that you sell you are going to be obligated to
purchase Lockheed Martin under the price of 275 now at this moment Lockheed is at
305 they're only gonna make this trade if Lockheed trades down to around 295
and then you're gonna obligate yourself to buy Lockheed Martin at 275 and in
exchange for that you are going to receive $2 per share because one
contract is 100 shares you're going to receive $200 in premium now you also
have to choose an exploration which means how long this is good for.
Considering that the market is extremely volatile right now I would do no more
than three or four weeks usually we do five or six weeks but right now
volatility is very high so that will put you in the first or second week of
December okay now what this means is that if if on the expiration date the
first or second week of December if Lockheed Martin is trading above 275
you keep this entire $2 per share which is $200 per contract now what we usually
like to do is once this trades once this trade executes so you would receive $200
for every share that you for every contract that you sell then immediately
we would open up a closing order with a limit price of 50 percent of the premium
received so again how you would enter this in it would be a sell to open so
you would wait until Lockheed Martin is trading down to 295 and then you would
sell to open one contract of the 275 strike price
with an expiration of the first week of December
with a limit price which is how much money you receive of $2 then assuming
that fills you would receive $200 less the Commission's that you paid so on a
net basis you receive anywhere from around like let's say $190 dollars then you would
immediately buy back that you you would set up a buy to close order with a
limit price of $1 meaning that once that contract decays in price and it starts
trading at around $1 it would automatically close out. This contract
this setup would have a probability of profit of around 85 percent per
potentially even more maybe even 90% so this trade is going to be profitable
around 85 or 90 percent of the time that's how you make money now if you
have a smaller accounting you don't want to use up so much buying power when
making this trade you would sell the 275 and then you would turn this into a
vertical credit spread which means that you would buy a lower price put option
so you're selling this and then you can buy a 255 put so let's say you would
receive $2 for the put that you sold and then you'd have to spend around $1 for
the 255 put that means on a net basis instead of receiving $200 for every
contract that you sell you would receive $1 net the benefit to this is that it
turns this trade from the naked option into a defined risk trade so instead of
having theoretically 275 dollars in profit in net risk let's say like
Lockheed Martin went bankrupt and technically you would have 275 dollars
per share or twenty seven thousand five hundred dollars in net risk under this
condition where you bought a lower price option you would only have $20 of risk
which would mean only $2,000 in max loss so assuming that even in this situation
where you sold the spread if Lockheed Martin went bankrupt you would only be
on the hook for $2,000 now in this situation the this
the problem with selling a vertical credit spread is that instead of
receiving $200 for every one contract you'd only receive $100 now
remember as options sellers the way that we get paid is by collecting premium so
in this example you're only receiving 50% of the premium that someone who
trades naked options would receive but if you have a smaller account and you
definitely want to trade verticals because it's going to reduce your buying
power reduction when you make this trade. So a few other things is you always want
to make sure that you trade small you should have at least 35% or 40% of your
account available as buying power so if you have like $100,000 account you want to
make sure that in no time you have less than 35% and that's due to the increased
volatility that we've experienced in the market place you should target having
45% of your account size available to trade because remember if right now you
have 45 percent of your account available so if you have a hundred
thousand dollars and you have $45,000 in available buying power if
the market falls 3% tomorrow and you don't make any trades
that $45,000 in available buying power is then going to
be decreased to around you know $25,000 to $30,000 thousand dollars
so you want to make sure that you monitor your buying power that way
you're not in a margin call and you're not forced to close out positions
remember as I said you should make sure that you evaluate your positions and ask
yourself for every open position that you have would you make this trade right
now so evaluate and go through your positions ask yourself, "Would I make this
trade again right now?" If the answer is "no" you should either close out this
trade or manage it that's how we make money in the stock market and in this
situation you're protected you can also sell call options so for example what
usually happens in a bear market is the market will go down like two days and
then it'll also go up one day so let's say for like Lockheed Martin let's say
it's currently trading a 305 it then trades down to 295 then let's say three
days later it trades all the way back up to 310 in this situation you should sell
a call option with a strike price of around 325 the
expiration that you should choose will be the same expiration as the 275
put that you sold this would then create a strangle so this is a way that
you can earn extra money I'm not a huge fan of selling calls outright I usually
like to pair a call option with a put option however if the market definitely
does descend into a bear market where it goes down all the time then my primary
strategy will be to sell call options and then potentially match it with a put
option once you know once the market actually like once it goes up so for
example if we're in a full-blown recession right then my primary strategy
will actually be to sell call options on once the market goes up so therefore
like I would sell the I would sell the up days and then on the downside I would
be extremely careful in selling put options and I would only make sure that
I sold a call a put option when I was sure that the market was overextended to
the downside now obviously there's no way of being sure but once I've thought
that the market was overextended to the downside so this is David Jaffee with
BestStockStrategy.com you can go to BestStockStrategy.com and enter in
your email address to receive over $400 worth of free training if you have any
questions let me know please like comment share and subscribe to this
video this is the best way to invest to become an investor and to become
successful in the stock market and earn predictable money stay away from like
day trading and all that stuff and options trading is by far and selling premium
is your best way to go and if you have any questions I'm here to help you thank
you