Compound Stock Earnings - A Brief Overview and Review of the CSE Options Trading Techniques

Compound Stock Earnings - A Brief Overview and Review of the CSE Options Trading Techniques

After starting my own home-based business, I began to look for ways to invest the money that I was bringing in. I knew that I wanted to handle my own portfolio, but I had no idea how to do so. A year ago, I could not have even told you the difference between a Bear and a Bull Market. With that being said, I knew that I needed something fairly simple that did not require a lot of time as I was busy with my own business. A close family member whom some would consider a guru of the stock market, suggested that I look at Compound Stock Earnings. Although he does not use it with his own portfolio (he says it's not enough action), he thought that it would be something that could be learned quickly.

The process starts by attending the free live online introductory workshop which occurs weekly. During these two hours, the basic technique is explained. Only a very brief overview is given, but it is an important part of the process especially for a novice investor. The workshop describes the basics of covered calls and how much profit one can expect with this technique, and finishes with a testimonial from a successful and satisfied client.

An option, otherwise known as a covered call, is like charging someone rent on a piece of property that you own. You own a stock and you sell an option, which gives the buyer of the option the right, but not the obligation, to buy the stock at a certain price up to a certain date. For example, if you own GE stock, you could sell an AUG 08 call. Simply put, the purchaser of this option will pay you a premium (rent) which will allow them to purchase your GE stock at the end of the August 2008 option month for per share.

If the stock is at or above , the buyer of the option will purchase the stock. If it is below , the stock will not be purchased and you will keep the entire premium and sell another call on the stock the next month. This is by no means a get rich quick way of investing, but the founder boasts that if the technique is used correctly, his clients will generate a consistent 3-6% per month regardless of market direction. Considering that the average mutual fund earns far less per month, the promise of 3-6% per month has many people learning this technique.

The Compound Stock Earnings technique has very specific rules about which stocks to purchase, when to purchase them, and which particular options should be sold against those stocks. These rules are meant to keep a person away from making poor decisions that will keep he or she from losing money or earning less than the 3-6% per month. However, as any investor knows, no matter how careful you are when you pick your stocks, you are bound to select one that bombs shortly after you purchase it. CSE teaches specific techniques that are designed to get you out of an unprofitable position or to continue to generate income until the stock recovers.

All of this information is condensed into one weekend. Most would say that they could never learn a technique well enough to risk their money after only one weekend. One of my favorite things about CSE is that once you pay the initial fee for attending the seminar, you are able to attend as many times as you wish for free. The classes are offered once a month at various locations in or near large cities around the country. Although this may not be convenient for some, if you do live near one of the major cities, you could learn CSE quite thoroughly. When you do attend class, you will find that the majority of those present are repeat attendees.

For the past nine months, I have been utilizing the CSE techniques. I have attended class four times and learn something new each time. Prior to the market dropping, as it has done recently, I was earning profits that were within the guidelines of the program. Unfortunately, it has become more difficult to earn substantial profits now that I have multiple stocks that have dropped significantly in value. However, by using some of the CSE techniques, I have still been able to generate income each month while I wait for my stocks to recover. If I had used a buy and hold technique as many people do, I would not have generated any income while I was waiting. Compound Stock Earnings, although not as easy to use as some often say, is a feasible option for those that would like to be more hands on with their investments without using high risk trading techniques.

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Stock Valuation Model - 3 Simple Techniques to Value Stock

Stock Valuation Model - 3 Simple Techniques to Value Stock

Stock valuation models are methods to value stock. Everybody knows the stock price but only few understand how much it worth and the other investors do not even care. If you are one of the intelligent investor, consider these valuation models in your next purchase.

Discounted Cash Flow (DCF)

This is probably the most common model that you ever heard when it comes to stock valuation. However, I found it a bit tough to do it. Simply because the discounted cash flow model have to consider revenue growth and the escalated cost at the same time, which can be too difficult to estimate and forecast as an outside investor.

Nevertheless, you can use this method in valuing stock by projecting future cash flow; from the sales and costs, and discount back to current value with Weighted Average Cost of Capital (WACC).

Dividend Discount Model (DD)

This model suits best for income investors. The idea is to project future dividend distribution based on the average historical dividend payout ratio and discount it back to present value. Although this is the simplest among all, it works best for high dividend yield stocks.

Nonetheless, the stocks must have very strong business performances that can guarantee the dividend payments 10 years down the road. And normally, Penny Stocks cannot be evaluated this way.

Earnings Growth Model (EG)

This is my favourite method as it is very practical and easy to do. Initially, I project its future earnings using constant or variable growth rate. Either constant or variable growth rate is depends on the expectation of its business performance within that period. Often than not, I normally use the historical business performance as a baseline provided its fundamental value remain intact. Then, I discount the future earnings with the expected return on investment (ROI).

I found this model as highly valuable since the stock price is easily reflected by its earnings, e.g. PER.

So, before buying anymore shares in the future, put some efforts to value the stock. You can reduce the risk of losing money significantly if you buy the stock at much cheaper price than its intrinsic value. Find out how to value stock in http://www.Stock-Investment-Made-Easy.com/calculate-intrinsic-value.html

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