Welcome in 6th part of Ideas to be rich at young age. In last part 5 , I have explained that you will get success with growth of your a...
Welcome in 6th part of Ideas to be rich at young age. In last part 5, I have explained that you will get success with growth of your actions. Now, in this part, we give more details.
Idea 1 # Growth of Positive Actions in Paper Assets
In paper assets, there are shares and mutual funds which you buy. You must focus to advance insurance of it. Insurance means, you have to save and minimize your loss. For example, if you have the shop and if you have bought insurance policy, then if you loss the material of your shop due to fire, you will get claim and you save your material by paying small fees of insurance policy.
Following are the main Strategies of Insurance of Your Paper Assets
1. Stop Order Strategy
In this strategy, if you see that your bought share price will decrease than your expected loss, you can use the stop order option for advance safety from such loss. For practically, you go to your DEMAT account and use the option SL-L. It means stop loss limit. You have to set this and you cand save this loss.
Ok, we are teaching its more detail with example
For example, I bought 1 share of RS. 100 and its trend is decreasing and its price has reached Rs. 90. I have bought its 10,000 quantity. It means, I loss Rs. 1,00,000 due to decrease of the price of share.
Rs. 100,0000 - 9,00,000 = Rs. 1,00,000. Now, Its trend is showing downward and its means, its price may go to Rs. 80 but, I can not tolerate its more loss but I have hope, its price may rise. So, I will stop the order by saying my stock broker to sell this share if it is price will down and reach at 88, I will sell it. I went to picnic and price was went to 80 but my stock broker is smart who sold it at 88 my all shares. Now, with stop order technique, I protected myself loss of Rs. 80,000
9,00,000 - 880,000 = 20,000
8,80,000 - 8,00,000 = 80,000
Now, learn how to Apply this Stop Loss Technique in your DEMAT Account
Steps to Stop Order in DEMAT ACCOUNT
I have SBI DEMAT Account and I am teaching in it.
1st Step : Just login your sbi demat account with password, login id and PAN CARD
2nd Step just go to trade
3rd Step : write the company name whose share you want to sell in future day for protecting the loss. Write its quantity.
4th Step : Now, Go to fix strategy of Stop order by choosing Order type option as SL - L
Following is the Video Tutorial. Watch it and understand it with details.
2. Use the Call Option
It is the strategy to book profit.
Buy : Pays the premium and right to buy shares at strike price like in real estate market, buy pays only downpayment and got the right buy at strike price.
Seller : Gets the premium and obligate to sell shares at strike price.
If shares will not buy at strike price at expiration of deal
Seller : Keep premium
Buyer : Pays premium
In call option, buyer has right to acquire the underlying asset or not. But seller has not same right. He has only obligation to deliver the asset, buyer chooses his right option.
Now, question is why calls option contract will happen in current time?
=> Buyer is thinking that price will increase and he will earn big profit with strike price.
=> Seller is thinking that either price will not rise or he is satisfy with money paid by buyer for accepting call option contract. This money is called premium.
Example of Call Option :
ABC Company's current market value is $ 100 per share. Mr. Mohan has 1000 shares. He want to sell immediately through call option contract. Mr. Sohan expects that price of same shares will increase upto $ 110 per share. He is ready to enter in this call option contract. For this, he has to pay $ 10 per share. If it will not become $ 110 per share, he will have the option right. If shares value will not reach upto $ 110 per shares, he can leave this contract. Now, this time paid only $ 10 per share. For this, he paid $ 10 X 1000 = $ 10,000
Now, there are two options for buyer.
A) Before expiry of contact, market price does not rise. Buyer does not buy 1000 shares at $ 110. He lost only $ 10,000 and save further losing of $ 10,000 due to exercising this contract.
B) Before expiry of contract, market price reached at $ 130 per share. Buyer exercise this contract and bought all by paying just $ 110 per share. For this, he paid only $ 1,10,000 and
Total gain = $ 1,30,000 - 1,10,000 = $ 30,000
Net Gain = $ 30,000 - $ 10,000 = $ 20,000
You do not get call option in basic DEMAT account, you need to activate this facility in your DEMAT account by submit the income declaration form and additional segment form with 3 years bank statement to broker office.
More details of option, you should learn the books of option trading, attend its seminars and learn from your broker.
3. Learn Share Market Words
This is very important to you to learn and understand share market words. In this, you must know
trend, moving average, bull market, bear market, up and down market, double top and double bottom
Good investor sees the trend and change the strategy of his share trading as per trend. Bad investor. Only buy and pray for its increment.
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