Stock Equities

By: Wendy Kirkland

The following is an excerpt from Wendy Kirkland's Wealth Building with Weekly Options

Modern economies offer any number of investment choices – vehicles through which you put money to use to make profits, earn interest, preserve value, create portfolio growth, and so forth.  From interest-bearing checking and money-market accounts to treasury bills (T-Bills) to municipal bonds, we have many investment choices.

The stock market is the place where individual investors (people and companies) own a share of the action and own a share of the risk, too.  Their ownership is measured in increments or units called stocks.  When companies sell shares of stock, they are selling a share of ownership in that business or conglomerate of businesses.

When a company first offers its stock for sale, it is called an IPO - Initial Public Offering.  This is the introduction of its stock to the public.  After shares of the stock have been available for a while, often options will become available.  If the options are popular, weekly options may then also be offered.

Let’s say you buy one hundred shares of stock on one of the major US corporations, such as Nike or Starbucks or Wells Faro, you are a share-holder.  For as long as you hold the stock, the value of your portfolio, defined as your group of investments, regardless of type, gains value or loses value as the price of that stock goes up and down.  If you paid $50 per share, and a year later your stock trades at $60 per share, your portfolio has increased by $1,500.  If the stock is trading at $40 a share, then your portfolio is $1,000 lighter.

Some stocks pay their investors dividends, which is the way they distribute the profits.  If your hundred shares of stock – which for discussion’s sake I’ll say is priced at $65 – pay a $1.75 dividend per share, then every quarter you will receive $175, which you can reinvest or take as income.

Of course, these are basic definitions and provide the structure and function of stocks.  The way stocks work in the everyday world of the stock exchange is a more complex issue.  For example, the number of stock equities available to traders and investors is huge: big-cap (capital) stocks, mid-cap, small-cap, penny stocks, all available in any number of sectors and industries.

In the US alone, thousands of companies sell shares of their stock, and the profitability of these companies is influenced by factors that no single individual or event can control.  That’s why financial services companies, including brokerage firms, hire analysts whose job involves watching trends and using complex formulas to determine short-term and long-term profitability.

Our choices have been narrowed to studying and choosing among, let’s say, one hundred and fifty companies that offer weekly options, which makes it easier to keep track of which companies are profitable and which are facing hard times, and who is merging with whom, and so forth.

Most of the options you choose to purchase will be based on stocks.  Unlike those major financial companies, you don’t have a staff of high paid analysts.  Therefore, you will learn and make use of tools that will give you the same edge.  You can become an expert on a concentrated and manageable group of assets.