I’ve been in the stock market for almost a year, and today I just want to share some of the things that I’ve learned over the past year.
Most stocks are included in market indexes, such as Nasdaq, S&P 500, NYSE, Russell 2000, Dow Jones, etc. The most popular ones are the S&P 500 and Nasdaq. What’s important and special about market indexes is that they usually indicate where the whole stock market is headed. It’s also interesting because stocks tend to follow the same trend as indexes, but stocks are what determine the performance of indexes. So this is kind of like a “did chicken come first or the egg” type of case.
Options are very popular in the stock market as well, because they can give you insane return even with very little capital. Of course, it comes with greater risk. Options are basically contracts that allow you to buy or sell 100 shares of a stock at a strike price within a period of time, but at a way lower cost than buying 100 shares directly. The biggest risk is the expiration date as contracts go worthless if the stock price does not reach the strike price of the contracts. Since options are usually sold by either people who own a lot of shares of the stock(calls), or people who has a lot of capital to back up the downside of the options(puts), which means they are people who have more money than average investors and they can easily move the stock price in the direction that they want it to be. This type of market manipulation allows them to expire options worthless, so that they can keep all the premium(cost of contracts) to their pocket without losing any shares or money. It sucks and definitely unfair for retail investors, but that is just how the stock market works.
