How to Make Money on the Stock Market

Making money on the stock market can be performed in many different ways. From stock options, dividends, to capital gains, there are many ways to capitalize on the stock market and produce huge profits.

Stock Options

Stock options are certainly the most speculative way to produce profits. With highly leveraged stock options, investors are able to control thousands of times more shares than they would with ordinary stock. Some stock options sell for as low as $.05 each, whereas a share of stock might cost as much as $500 per share. The risks of stock options are great as well; it's possible to see the entire principle amount wiped away in the average day of trading.

Dividends

Dividends are underrated as a way to generate profits with the stock market. Many investors just take the quarterly checks and deposit them in their accounts without much thought, but many people are making large amounts of money on high dividend stocks. Dividends are the funds paid as a result of a good business performance; the small payments per share do add up in the long run and are a great way to compound returns on top of what is normally expected. A stock that performs to the market average of 9-10% per year is made even more dangerous with a 4% dividend yield added on top. Seniors and growth investors alike are finding plenty of opportunities in the high dividend stocks of the market.

Capital Gains

Everyone thinks of buying low and selling high, and that's exactly what capital gains are. The big profits in stock investing and speculation comes from the change in price over long periods of time. If you were to properly time the world markets as they boom and bust, you'd be a billionaire in as little as a decade. Every year, regardless of worldwide economic stability, there is at least on market with a runaway stock market. Think the US in the 1990s, China in from 2005-2007 and now Latin America from 2007 onward. Certainly timing is everything when discussing capital gains.

Covered Calls

Covered calls are relatively untouched as a way to make money with the stock market. Covered calls are essentially selling your own options on stock you already own. For instance, if you owned 500 shares of Microsoft, you would be able to sell options of your own with a certain strike price and profit the premium paid by investors for your options. Though this does include some risk of limiting returns due to exercising if the stock moves up too fast, covered calls are used by many investors to generate an income on stock they already own and further compound profits.

The World Markets

The world markets have an additional variable in play than domestic markets such as the NASDAQ or NY Stock Exchange: that is the changing prices for currencies. When buying foreign stock in a foreign currency, not only is your investment subject to change with the stock prices, but also the price for currencies. If a foreign currency rises by 100% against your home currency while your investments are in place, your stock market profits will be doubled when you bring the money back home.