To figure out which dividend stock is giving the best yield, you need to know a few things first. Look at the company’s stock price and then look at the annual payout of the dividend. you divide the dividend payout by the stock’s price per share and that is what the dividend percentage is. As the stock price fluctuates, the yield will too. Stock price of XYZ is $100 per share and the annual dividend is $15.00. That would make the yield 15%. Typically the payouts are made on a quarterly basis, so every three months a share holder will receive $3.75 per share.

What I love about investing in stocks that pay a dividend is as you own the stock through each payout, it lowers the price you’ve already paid for the stock. If the stock never moves from it’s price of $100, you can figure your share price to actually drop from what you paid for it. Of course a stock price will never stay at any set price so you will be making money in two different ways (in a sense).

Be aware though that just because a company will payout a dividend, it doesn’t mean that it’s going to stay that way. As a company’s stock price falls you will see the dividend percentage rise. In many cases it’s a good thing for a share holder because it gives the investor a chance to buy more shares at a lower price. It will also help in the fact that you will be receiving a better yield. Just because the stock price falls doesn’t mean it a bad thing for the stock. All stocks rise and fall on a regular basis. Other investors will take profits after the price has risen so much, As long as the company is doing the right thing, the price will always come back and pass it’s recent high. If the company continues to go through a rough period for some time, it will be reflected in the stock price. at that point they will either lower or suspend the dividend to help get it back on the right track until the company is on solid ground again. If you see a dividend yield too high (above 15%) it’s a good indication of trouble ahead for the company. You want to stay with a company that has a percentage rate of anywhere between 4% – 10%.

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When you buy an option, you are not buying anything tangible. You are buying the right to buy something at an agreed upon price. The same goes for selling options. For example, you could buy the right to own 100 shares of IBM at $128.00 a share. If the price of the stock goes to $132.00, you can still buy it at $128.00 because you own the option to do so. This transaction is called a call option. If you believe the stock is going down in price, you could buy what is called a put option. A put option can be used to protect the value of a stock you already own. Options are often used in this way to hedge risk and exposure in the stock market.

An options price moves is the direction of the stock price, but usually at a higher percentage. The price is affected by many things such as time value. Options expire on the third Friday of the month for which they were purchased. If you bought a December call option, the option would expire on the third Friday of December. As the option gets closer to the expiration date, the value starts going down. If you do not exercise the option or sell it by the expiration date, the option expires worthless and you will lose your initial investment. Other factors affecting the price are volatility of the stock and intrinsic value that has to do with how close the current price is to the option price.

These are some of the basics to understanding options. If you are considering trading options, you should plan to do a considerable amount of research before risking money in the market. When approached correctly, options trading can be very rewarding.

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Here are the other five things to know when shorting stocks.

6. Margin Calls – This is probably the scariest thing about owning a short position in any company.If the stock you’ve decided to short moves in the wrong way (stock price rises), your broker will insist that you do one of two things. One, deposit more money into your account, enough to cover the purchase price of the stock at the current price. The other choice is that your broker will insist that you sell some of your long positions to cover the margin call or they will do it for you in their own way.

7. Early Sale – If the original owner of the shares that you borrowed decides to that they want to sell the stock, you must replace it — either by finding other shares through your broker or buying it on the open market. Remember all you did originally was “borrow” the shares.

8. Short Squeeze – If you’re new to the stock market then this is a term that you might not be familiar with. It’s a term that is used quite often on Wall Street. A short squeeze is when the price of the stock jumps up in value quickly, causing short traders to “cover” their positions. Which means that they have to buy shares to cover the ones that they borrowed. This typically causes higher prices, which prompts more people to sell and to take profits. This is something that you may never want to get caught in the middle of because of the ferocity of the situation as well as get quite expensive.

9. Properly Covering You Position – You may not even realize it, but you can have a short and a long position at the same time. When you go to “cover” your short position, you need to tell your broker clearly that the shares you’re buying are to cover your short position. If you just buy the share while still having a short position, you’ll have conflicting positions. Many times people are in a rush to cover their position, that they may not even realize their mistake of overlooking their selection, especially online traders.

10. Dividends And Taxes – If you have borrowed and shorted a dividend-paying stock, you will receive the dividends, but you, in turn, must pay the original owner the value of those dividends. Also, should you hold a short position for more than one year, well, tough luck — the IRS still treats capital gains as short-term gains. Ah, Uncle Sam is always reliable!

I hope these ten things I’ve given to you will help you in your trading. If you are new to the stock market, then it’s wise to stay away from shorting stocks until you learned more of the basics.

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Chasing a stock is a common mistake you need to be aware of, or your portfolio will take a beaten. This is when a stock had some good news come out and you missed the information when it was first released. In other words, the stock price made some good gains and you didn’t take advantage of the situation. I’ve seen stocks jump in value by over 30% and watch other traders try to guess at if the price would come back down temporarily so they could jump in. As the price goes up, they try to stay near the low end of the trading range, hoping for the pull-back. When the pull-back does come, it comes in the from of profit-taking from other trader and investors that got in on the initial news.

This can also take place over a period of a couple of days where the stock price jumps as much as 100% or better, only to have it come back down to levels of the original price before the move up.

Just because the stock price has moved up in a relative short period, doesn’t mean you should jump in for a quick gain. The traders that do that are very experienced in investing and this practice should be left for them to do. Any stock that you are planning to get into should be one that you’ve researched. You should be very familiar with it’s balance sheets, as well as other financial information in regards to the company. If not, take some time to check out a stock market site for information. You can never do enough research.

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