Learn about Stock Market Myths and Improve Your Covered Call Strategy
Many people looking for worthy investment ventures are often hesitant of putting their hard earned money in the stock market. One of the reasons behind this is because of the different myths and rumors surrounding this particular financial market. This is a sad fact, as the stock market is actually one of the best avenues for an individual to accumulate substantial financial resources. This is especially true if an individual knows the best covered call strategy to use, such as utilizing the most reliable covered calls screeners.
Before we get into detail of how individuals can improve their covered calling strategies, let us first delve into what the most common myths surround the stock market.
Myth No. 1: P/E ratios are effective methods to compare stocks
It is easy to find P/E (price to earning) ratios. Due to this, a lot of individuals are led to believe that these numbers will tell them whether a particular stock is expensive or cheap. This has also resulted in the creation of the belief that these P/E ratios are effective methods to compare stocks.
The truth is that those who participate in the stock market need Value to Price ratios. With these ratios, investors and traders will learn whether a particular stock is cheap, fairly priced or expensive. Of course, it is still necessary for investors to have an accurate way of computing the stock’s value, but learning about the intrinsic value of a stock is much more effective than P/E ratios.
Myth No. 2: Young traders and investors should take greater risks
One of the most common pieces of advice that young and new traders and investors receive is that they should take more risks to increase their chances of better results. This is something that should be avoided. The simple reason is because it can result in severe financial problems.
What young traders and investors should know is how they can make money in stocks that come with low risk. They should purchase stocks that have consistent and predictable growth earnings. They should never put more than 10% of their money into a single stock. They should not own more than 2 different stocks in the same type of industry. Lastly, they should use stop-sell orders so that they can further reduce their risks.
Myth No. 3: Investing more leads to greater profits
Another very common myth surrounding the stock market is that individuals should invest more so that they can generate greater profits. This is not the case. Stock owners have the opportunity for steady income stream by making use of the stocks that they already own through the help of covered call options.
Covered call options are considered to be one of the most effective ways to generate extra income in the stock market. Those who undergo covered call writing can generate profits from these investment options without having to further spend more money on purchasing new stocks. The fixed monthly income that these options provide allows investors to mitigate their risks. In addition, these options often expire worthless.
Those interested in this particular investment option should know that making use of reliable covered calls screeners will help increase the chances of becoming more profitable. The use of such a service is considered by many smart investors to be their best covered call strategy. To ensure that the screener is highly effective, choose the screener offered from Barchart, a leading financial market information provider. Visit barchart.com for more details.