21st Century Academy

The secret to renting shares begins with the right mindset. Stock market investing does not have to be intimidating, and renting shares is amongst the most interesting yet untapped aspects to consider. The process requires a little knowledge of what share renting really is as well as its potential as a lucrative moneymaking prospect.

The first thing that you need to know about share renting is that anyone can get wealthy. Understanding the basics of this innovative concept is an excellent angle to take on the strategy. The best approach is to make an analogy between stocks and properties.

Shares as Property

Some website developers look at their sites as real estate. They create their pages with the intent to rent advertising space on them. In addition, the look at the project as a potential selling item for the future. Just as the website developer looks at each of his sites as property, you can look at your shares as property as well.

The Share Renting Process

The share renting process is relatively simple and if you have the right frame of mind combined with the right knowledge, you have an opportunity to maximize your earning potential. Consider the purchasing process:

In the United States, people are able to purchase a parcel of shares in lots of one hundred. In Australia, buyers have to invest in lots of one thousand. After you make the purchase, you can sell a call option for one month. Understanding what a call option is helps.

What is a Call Option?

A call option is purchased much like a share. A person can purchase one call option that is applicable to 100 shares. This allows the buyer to purchase a certain number of shares for a set price. The purchase has to be made within a predetermined amount of time.

This benefits the buyer because she can purchase shares for the set amount no matter what the going rate is at the time. This is a very attractive prospect for many investors and those who rent shares offer this incentive to the buyers.

Making Money on Renting Shares

Here is the breakdown of how you make money-renting shares:

1. Buy shares at 100 dollars
2. Sell a covered call for 105 dollars, locking in the rate
3. Check the progress

The third step is quite simple and you needn’t obsess over the outcome. Consider the different results that may transpire.

Possible Outcomes

The price of shares goes up. This means that you are forced to sell your share for the set price in spite of their going up. This is still beneficial to you because you still make a profit since you rented the shares for more than you initially paid.

The price of the share stays the same but you are still going to benefit because of the selling price. If you hadn’t rented the shares, you would simply break even.

What if the share goes down? You get to keep your shares, and if the loss is equal to the amount that you charged to rent the shares, you break even.