Did you know that there is a secrete way of increasing your stock market returns? If you are already making money by trading stocks you may want to consider looking into trading stock options.

A stock option is simply a contract that gives you the right to buy or sell a stock at a specific price on or before a specific date. Once more they can be extremely powerful and can greatly increase your returns if you are right, or increase your losses if you are wrong.

For instance say stock XYZ is trading at $48. We believe that this stock will make a large move upward in the near future and because of this we have a couple options here. We could choose to buy the stock or we could buy the $50 call option on it for $4. If the stock goes up to $58 then your option would be worth at least $8 ($58-$50).

This means that the option contract would have given you at least a 100% return whereas if you had simply bought the stock instead you would have made a 20.83% return. Of course both are great returns, but the second one will affect your account much more and will help you to achieve your financial goals 5 times faster than the first option.

But for every upside there is a downside. Since options are actually dated and will eventually expire you may find that your options will simply end up expiring worthless one day.

There are always ways to manage your risk, but if you are unable to trade stocks profitably then investing into stock options will pretty much only increase your losses.

On the other hand, if you are making money then stock options can be extremely powerful and can even help you to increase your returns and control more shares with less money. Just remember that you have to use these tools carefully and have a plan.

If you are just using them because you heard they were powerful and you want to get rich quick without a plan or experience, I would reconsider.

Now that you know, What is option trading here is an interesting article on stock option trading