How Options Trading Can Help You Earn A Sideline Income | Written In Layman Term For Beginners

Let’s assume that you have always wanted to buy a Rolex watch and you have a budget of $10k.

The current market price of this Rolex watch is $10.5k, which exceeds your budget.

What if you can get a discount so that the Rolex watch now falls below your budget?

What if you and the seller of the Rolex watch enters a 30-day agreement as follow:

Scenario 1) If the market price of Rolex watch in 30 days’ falls below $10.5k, even by $1, you will buy the Rolex watch at $10.5k.

Scenario 2) If the market price of Rolex watch rises above $10.5k in 30 days, you will not buy the Rolex watch from him.

If you agree to this agreement, you will be paid a reward of $1k, regardless of the outcome.

So, fast forward 30 days:

Scenario 1 happens, the market price of Rolex is now $10.4k, you will buy the Rolex watch from the seller at $10.5k. However, due to the reward that you have collected, you are only paying $10.5k – 1k = $9.5k for the Rolex watch (which is within your budget).

If you choose to sell the Rolex watch according to market price then, you can still earn a profit of $900 (10.4k – 9.5k).

What if Scenario 2 happens?

The market price of the Rolex watch now rises to $10.8k. You will not need to buy the Rolex watch from the seller anymore. However, you still get to keep your 1k reward due to the agreement you had with the seller.

You can use the money to add to your budget to buy another watch or simply enter new contracts to earn more rewards.

Assuming every month, Scenario 2 happens for you, so you will be collecting your reward every month which would provide an extra sideline income for you.

In the event that Scenario 1 happens, you will be getting your watch at a discounted price that is within your budget.

To put things into perspective, the above example is how a PUT contract works.

There are more real life-examples as analogies to how options works in the newbie guide that I have prepared in this thread:
The Newbie’s Guide To Options Trading

I hope this piece of info is useful to you and can help you earn some extra income to cope with the rising cost of living due to inflation or to reach your financial goals faster.

***
Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading

The LEAPS Strategy has helped me make more than USD120,000 in 2021. Here’s all you need to know about this strategy that can help you increase your wealth exponentially:
The Ultimate LEAPS Options Thread

Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts behind executing these trades:
MY TRADES

Excited to start your trading journey or perhaps try out with a paper trading account to build your confidence in trading? Check out this step-by-step to help you get started:
How To Buy Options on Interactive Brokers (Step-By-Step)

If the bear market in 2022 is making feel depressed as your stocks come tumbling down, read this article to find out how you can use options trading to help you claw back some of your losses as you await market recovery:
How I Do Earn Even When The Stock Market Is Bearish?

I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day

I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021

This blog is as authentic and as transparent as I can share, I do not just show the wins and hide the loss. I have made some very bad decisions in the first 8 years of investing and paid a huge price for them. Here is the loss I have accumulated during these years. I hope you learn some lessons from my mistakes.
I Cut $135,715 Worth Of Losses In The Last 1.5 Months

Follow me on your favorite social media platforms, Facebook, LinkedIn, or Twitter, to get notified of my latest blog posts. Or join our investing/ trading community at Telegram to exchange ideas or ask questions relating to investing/ trading.