Rich Dad Education Blog

Q: I’m just beginning to venture into options trading, and am wondering if you could shed some light on what a spread trade is and why it’s useful.

Good question! Let’s first define what an option-spread trade is. A spread is a strategy that involves buying at least one option, while selling another simultaneously. With spread trading, you can create virtually limitless combinations of risk and reward. When most novice traders are introduced to the options arena, they typically begin with simply buying call or put options. While these two strategies can be quite lucrative when you are right, they can also cause quite a bit of damage when you are wrong. There are two primary advantages to spread trades, the first of which is that spread trading allows us to reduce the cost of the trade, thereby reducing the risk. For example, suppose stock XYZ is currently trading at $60, and you want to establish a bullish position. Assessing the current option quotes, you see that the one month 60 call is trading at $6 and the 70 call is trading at $2. Rather than buying the 60 calls outright for $6, we could enter a call spread by buying the 60 call and simultaneously selling the 70 call. This would drop our cost (and max risk) from $6 to $4.

A second advantage of spreads is the ability to place multi-directional trades. In other words, it is possible to create spreads that profit if the underlying stock moves up or down, up or sideways, down or sideways, etc. This allows us to widen the range of profitability, thereby increasing the probability of success. Becoming more comfortable with options spreads necessitates the use of risk graphs. Risk graphs visually portray the risk/reward characteristics of an options trade while also allowing the user to examine “what if” scenarios to see the effects that a change in time or volatility would have on a specific strategy.

Posted 09:49 AM | Permalink | Comments (0) | TrackBacks (0)

In his latest Conspiracy of the Rich Bulletin, Robert keeps you updated on the latest developments in our economy – and how they impact you. The world is changing, but you can stay ahead of the curve with Robert’s COR Bulletin.

Due to the conspiracy of the rich, America is becoming a third world nation. This is why I write about and am an advocate for financial education. It is only through financial education that we can reverse the trend of a dwindling middle class in America. – Excerpt from Robert’s Conspiracy of the Rich Bulletin.

Go tohttp://conspiracyoftherich.com/exclusive-12 to read the first of four exclusive updates that you need to know to survive and thrive

Posted 09:17 AM | Permalink | Comments (0) | TrackBacks (0)

Entrepreneurs come in all sorts of packages and from all different walks of life. They share some common characteristics: a desire to experience the freedom and fulfillment of owning one’s own business, the courage to accept risks that are inherent in chasing one’s dreams, and the desire to achieve success. Most entrepreneurs are passionate about the products or services they offer; although some are only passionate about them as a means to an end.

Just as no two entrepreneurs are alike, no two businesses are alike. Businesses that offer similar products and services in a geographic area compete for the same clientele in order to survive and thrive. Further compounding the problem is the widespread popularity of Internet shopping, which may put a local business in competition with a business halfway across the globe. This is why a business must set itself apart in some way in order to make it.

In some circumstances, an entrepreneur’s idea is so revolutionary that their new business has no real competition. While this scenario is rare, it is still conceivable. The challenge then becomes educating the public and convincing people that their business fills a need or desire. And once their novel idea has caught on, would-be competitors are sure to start springing up all over the place, using gimmicks and running tempting specials with the aim of stealing away your established clientele.

Most new business owners give considerable thought to starting and running their new business; however, there are things that never cross their minds. These are the intangible aspects of operating a successful business, and the details can make or break you. No article could be written which could address the multitude of points to consider, so we will start with a basic first step: making a good first impression.

We have all heard the admonition, “One never gets a second chance to make a first impression.” Truer words have never been spoken. I once read someplace that it takes seven meetings in which an impression, contradictory in nature, to the first impression is given before a person can change his or her mind about someone or something. While this can be good news to someone who made a great first impression but bombed on the second meeting, it illustrates the importance of getting it right the first time!

Before the First Meeting

While some are naturally charismatic, poised, and influential, most of us have to put some work into presenting ourselves in a favorable light. The best way to do this is to:

• Ask yourself what impression you wish to convey
• Devise a strategy for achieving the desired result
• Rehearse all aspects of the strategy until you can implement it smoothly and comfortably

The Impression You Wish to Convey

The first two components one should strive to incorporate into a first impression are universal and crucial regardless of the nature of your business, while the third will require some reflection and insight:

• Competence. Everyone wants to do business with someone whose ability they can trust
• Integrity. People also want to be able to trust the character of the people to whom they are entrusting their patronage
• The specific needs unique to your clientele. To determine these needs, you must understand the individuals who make up your target market. For example, would affordability appeal, or would they be drawn to more luxurious or exclusive options, and be willing to pay accordingly?

Perhaps the consumers value environmentally friendly alternatives to the status quo, or do they care more for convenience than conscientiousness? If you are unsure of your consumers’ preferences, make it your priority to find out. Do your research. Conduct surveys, or informally poll friends and acquaintances for their opinions

Once you have done extensive research to determine who your target market is and what they want and need, find out about your competitors to determine where they fall short. Learn how to position yourself in such a way to fill in those gaps. Once you have committed yourself to doing business in this manner, consider how you can communicate to a potential client. Be comprehensive and concise, and devise a way to convey the superiority of your product or service without criticizing your competition or sounding arrogant. Practice your pitch until you are satisfied that you have nailed it; you should sound confident and knowledgeable, but not rehearsed. When rehearsing, enlist the assistance of someone who can ask questions to help you become more comfortable with being put on the spot.

Avoid the tendency to sound like a high-pressure salesman. While your job as an entrepreneur involves a degree of salesmanship, that fact should never be in the forefront of a person’s mind when he or she is engaged in a conversation with you. Customers should get the impression that you are making yourself available to answer their questions and provide information to help them make up their minds whether or not they would like to do business with you. Know your ideal customer’s needs, know how you can meet them, and practice communicating your value in that respect in an effective way. But leave the hard selling to car salesmen.

The First Meeting
The First Seven Seconds.

While we may tell our children that you cannot judge a book by its cover, we all do it on a daily basis. Studies have shown that the most important part of a first impression is formed within the first seven seconds. This means that, like it or not, your appearance is a crucial part of a first impression.

• Pay close attention to grooming. Be freshly showered and have neatly trimmed, combed, and conservatively styled hair, brushed teeth, fresh breath, and clean, trimmed fingernails. Men should be clean-shaven, with any facial hair trimmed and tidy
• Dress appropriately. Dress professionally and in a way conducive to the impression you are trying to portray. Now is not the time to strive to look unique; in fact, any consultants to fledgling entrepreneurs teach that standing out in appearance in any way is a serious strike against a business person. Your clothes should be carefully selected and properly laundered or dry cleaned. If you are uncertain as to how to dress for a specific occasion, purchase a book on the subject
• Develop good posture. Your posture is the way you share your opinion of yourself with the world. Stand up straight, put your shoulders back, and hold your head high
The Greeting
Once you have made your initial impression, the next couple of minutes are the most important.
• Make eye contact. Doing so lets someone know that he or she has your attention
• SMILE! It is impossible to present yourself as a friendly person if you don’t wear a genuine smile
• Introduce yourself in a clear voice. “Hello, I am…” Use the appropriate volume
• Give a brief, firm handshake. Your hand should not be limp or fingers loose, but neither should you squeeze so hard that it seems as if you are trying to assert yourself. Release the hand before continuing to speak past your introduction
• Remember the name. Use it often in the conversation to follow
The Conversation
• Treat small talk as an opportunity to gather information. Take mental notes, and use those notes later in the conversation if the opportunity presents itself. If the person is an important potential client, take actual notes as soon after the meeting as possible, and review them often for information that may prove useful to you
• Take care to use open body language. It has been said that up to 93 percent of communication is nonverbal, which means that one’s body does the majority of the talking! Keep your arms and legs uncrossed, your head up, your body positioned directly toward the person with whom you are speaking, and eliminate any fidgety body movement
• Maintain eye contact. This lets the person know they have your undivided attention. It also makes you appear more honest and trustworthy
• Speak and listen. Answer any questions fully, but do not monopolize the conversation. Never interrupt when someone else is speaking
• Speak as one who is intelligent and educated. Speak smoothly and use proper grammar, and avoid the use of slang. Do you remember Audrey Hepburn’s character, Eliza Doolittle, from the movie My Fair Lady, and how drastically her image was transformed simply by refining her speech? If you find yourself in need of some assistance in cultivating the way you speak, consider purchasing one of the many programs available for helping one polish and refine his or her speaking habits. It is a worthwhile investment of your time, money, and effort
• Show the appropriate level of enthusiasm. Others cannot be excited about the products and services you offer unless you show that you are
• Use reflective listening. When appropriate, nod, respond with facial expressions, say, “Mmmhmm,” or otherwise let the person know you are listening. It also helps to find occasions to repeat portions of what he or she said. “I agree with your earlier statement that…”
• Be conscious of your words. Pay attention to what you are saying at all times. Be careful with the humor you choose to use and use it in moderation, as it is difficult to be absolutely sure you are not risking offense to someone or creating a negative impression of yourself
• Read cues and respond accordingly. Adjust your approach if someone seems uncomfortable, proceed if someone seems interested receptive

The Farewell

Be willing to end the conversation whenever the person with whom you are speaking indicates that he or she has no further need of the conversation. While he or she may be direct: “Well, thank you for your time. I will get back to you soon with my decision,” it is equally likely that the potential customer may not know how to gracefully end the interaction. If you notice your acquaintance checking the time, looking around the room, fidgeting, or ceasing to actively engage in the conversation, wrap up your end of things. While you definitely do not want to seem abrupt, from the time it becomes apparent that this is the stage of the conversation you are in, you should have smoothly ended the conversation within 30-60 seconds. If you are the one moving to end the conversation, however, allow much more time. Ask if they have any further questions, and if so, answer them fully. If not, take a couple of minutes to say goodbye when appropriate.

When saying goodbye, use the individual’s name. Express that you enjoyed talking with him or her. Offer another handshake, and thank them for their time. Now is also a good time to give a business card and express your willingness to be available in the future if there is any way you can be of assistance. Do not underestimate the importance of making a smooth exit from conversation, and do not neglect to practice doing so when you are rehearsing for successful interaction with prospective clients and business contacts. As Lillian D. Bjorseth says, “Your last words are as important as your first words.”

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There are essentially five different ways you can raise capital to start-up or expand a business.

1. Personal assets of the company principals
2. Funding from family, friends, and business associates
3. Credit (personal and business credit cards, personal and business lines of credit, and credit lines provided by vendors)
4. Loans (personal and business loans)
5. Outside investors

Outside investors generally consist of venture capitalists, angel investors, other private investors, and Small Business Investment Companies (SBICs).

Angel investors play an important part in funding start-up and growing businesses; venture capitalists generally are looking for established businesses that have above-average growth potential in high-tech and high-growth industries. Most venture-capital firms do not pursue investments below one- or two-million dollars; thus, are not normally interested in funding smaller start-up companies. Angel investors; however, commonly provide funding after the business has been started by using seed money from the owners or others.

Angel investors are generally affluent individuals who provide money to help start or grow business in exchange for debt or ownership equity. The term angel comes from the practice in the early 1900s of wealthy businessmen investing in Broadway productions.

Profile of a Typical Angel Investor

The Center for Venture Research at the University of New Hampshire, which does research on angel investors, developed the following profile:

• The average angel investor is under 50 years of age
• Angels are affluent, but not necessarily millionaires
• Most are college educated and self employed
• Most angels invest close to home (seven out of ten investments are within 50 miles of their home or office)
• Angels usually don’t invest more than a few hundred thousand dollars in any one company
• Nine out of ten investments are given to small, start-up firms with fewer than 20 employees
• Most angels invest in business areas that they are familiar with and have some expertise
• Minimum expected return on their investment is 30 percent annually, but many want a much higher return – each angel will have their own requirements
• They are risk takers, expecting about one-third of their investments to result in a capital loss
• Angels accept an average of three out of every ten deals they are willing to consider
• Most angels are successful entrepreneurs who want to help other entrepreneurs get a business off the ground
• Angels typically offer expertise, experience, and contacts in addition to money

Estimates are that there are at least 260,500 angel investors active in the country funding more than 55,000 small companies each year. The challenge is to find one in your area that invests in your type of business. It could take four to six months to raise money for your company so it is important to start looking before you need the money.

Take the time to find the right angel investor for your business. Research what other businesses the angel has funded in the past. Make sure there is a match in their interests and your business goals. You might have a great business, with lots of potential, but pitching it to the wrong angel will be a waste of time for you and the investor. Just because someone has money to invest, doesn’t mean they want to invest in just any company. Ask every angel investor you meet if they know of other investors who might be interested in your type of business. Networking is critical to find elusive angels that may have an interest in your particular business concept.

Once you find an angel that seems to be interested in your type of business, pitch your plan. Typically, entrepreneurs make their initial pitch in an informal session. If your idea is judged to have promise, you may be invited to give a more formal PowerPoint presentation followed by a question and answer session.

Tips on Pitching to Angel Investors

• Time is at a premium. Come prepared with solid arguments about the product or service, its marketability and with evidence of commitment to the business in the form of sweat equity and investment
• Tell your story quickly. You not only have to be quick, but remember you are competing for the investor’s attention in a Blackberry world – seeing your potential investor(s) texting is not a good sign. Make your presentation entertaining from the start to get the investor(s) hooked. Tell them about the problem you are solving, followed by interesting information on the founders and how they came together with the business idea
• Briefly tell about unique strengths, background and skills, and how the team will be able to give the proposed business a market edge
• Change your delivery pace throughout your presentation. Speed up when telling stories, allowing you to get through the slides rapidly. Then slow down as needed at more detailed financial and projection slides. Practice will help you perfect your presentation skill
• For a PowerPoint presentation, make sure your slides have style. Get help if you need to add vibrant colors and attractive layouts. Make your slides simple, but interesting and professional
• Highlight the key elements of your product or service and let it go at that. If the investors want more, they will ask for it
• End with a strong message and key points you want the investor to remember. Most presentations end with financials, which, although important, are dull. Instead, end with a slide that gives the key elements as to why they should invest their money in your company
• Then have a slide come up with just your company logo and get the investors focused on you so you can tell them with confidence and sincere passion that you believe in your business
• If you don’t know the answer to a question, say so, and promise to get back to them. Don’t fake it. Angels put a high value on trustworthiness. In fact, acknowledging weak areas will let angels know you need their help and can actually add to your credibility
• A final word of caution. Show enthusiasm, but don’t force it. If a presenter is too excited, it may come across as being phony and credibility is lost. Show your passion through being prepared with a well, thought-out business plan. Deliver your presentation with confidence

What are Angels Looking for in Your Business?

• First and foremost is evidence of a market opportunity with growth potential
• A strong management team
• An exit strategy down the road, including forecasts on taking the company public and a list of potential companies that may want to acquire the company
• A fair evaluation of what your company is worth

The top four reasons investments are rejected: 1) insufficient growth potential,
2) overpriced equity, 3) lack of talent in management team, and 4) lack of information about the owner and/or key personnel.

The presentation is just one of the first steps in getting funding. If the investor likes your idea, plan on them spending a lot of time investigating you and your company. You, of course, should already have a finely tuned, well-written business plan that spells out the plan for the company start-up and projected future growth.

As the angel investor (or a group of investors) is investigating you and your business, you should also be spending time getting to know them. If the angel decides to invest and you decide to accept the money, then this is going to be a long-term relationship. You are going to be working and talking with your angel for months and years, so make sure that your angel is someone you want to partner with. Life is short, so you may as well partner with people you actually enjoy being around.

What Do Angel Investors Expect from Their Investment?

There are probably as many answers to that question as there are angel investors. Each has their own criteria and set of requirements. Get to know your potential angel so you know what to expect. Here is a list of typical expectations:

• Most angels want a position on the board and possibly a consulting role
• Most are looking for anything from a 5 to 25 percent ownership in the business Know what you are giving up; investor financing is the most expensive money you can get, if you succeed
• Some want securities: common stock or preferred stock with certain rights and liquidation preferences over common stock
• Potential investment returns of 30 percent per year to a return of five times their investment in the first five years. Be sure to understand what their expectations are before you seal the deal
• Some angels may want the first right of refusal to participate in the next round of financing. This may sound harmless, but it could limit your access to venture capital funding if the venture capitalists want only their own players on the new team
• Angels often ask the business to agree to not take certain actions without the angel investor’s approval, such as selling company assets, issuing additional company stock, and expanding into a new market. Again, be aware of what control you are giving up in order to secure the funding

One final word of caution – don’t expect to get any money right away. Angels will do a lot of research and carefully investigate you, your management team, and your business plan. This may take several months, depending on how many other opportunities they are considering at the time. That is why it is so important to start your search for funding as early as possible.

And if you get rejected by an angel, ask them to tell you why. Find out if it was your basic business idea, the way you presented the business to the investors, or some other problem. Learn from the angels, they have a lot of business experience. It could be that you have a great idea, but the angel has many other good opportunities at the time and can only fund a few.

Always remember to ask for the names of other investors who might be interested. As with anything else, you will probably have to talk to several investors before you find one who likes your business and one that you want to do business with. You may need to get 100 introductions to get 10 meetings to get 3 presentations to close one deal, but the key is to get talking.

Being touched by an angel really can give your business the opportunity to get off the ground or to expand into the next phase. Search for the proper angel and then be prepared to show them why they will win by investing with you and your company.

Posted 10:39 AM | Permalink | Comments (0) | TrackBacks (0)

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In this fourth installment of his exclusive preview of his upcoming book on leadership for entrepreneurs, Robert talks about the most destructive and powerful cause of negative emotions in business and life – blame.

Always remember that the word blame comes from the words be-lame. When you blame someone else for your problems, you give the power over your problems to the person you blame. By being lame, you volunteer yourself to be the victim. You are the lame victim, and they have more power than you.

- Excerpt from The Four Main Causes of Negative Emotions

Learn how to get past blame and onto the road to success.

Go to http://www.conspiracyoftherich.com/read/toc to read more

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Probably the most frequently asked question by new real estate investors is, “Where do I start when I don’t have any money?” There are many answers to that question and we will be addressing several different methods for investing in real estate with little or no money in this series of articles. What every new investor needs to realize is that you don’t need excellent credit or a surplus of cash to get started in real estate investing.

In fact, it is highly recommended that new investors start investing without using any of their own money, even if they have extra money to invest. This may surprise a lot of you, but having money can be detrimental to learning to be the best real estate investor possible. If you have money to invest, it is very easy to pay too much for a property. It is also tempting to use money as a crutch to close deals that are not good deals or marginal at best. But with the right education and an open, teachable mind (using the creative mind of your coach and your mentor is allowed) no money can be a substantial force to push you to be a more skilled, creative, and professional investor.

If you do have money to invest, you will be surprised at how fast investing in real estate can gobble up your nest egg. If you are only relying on your own money to invest, no matter how much money you have, you may end up cash poor very soon. If you are forced to develop ways to invest in real estate without using any of your own money, you will soon master techniques that allow you to buy in any market under any conditions. This will also force you to develop numerous sources of funding – having these sources setup will help you in future deals to have money available. You will always be grateful that you learned to invest in real estate without using any of you own money.

There are many ways for financially constrained investors to begin making money and/or generating real estate cash flow without using their own cash or credit. First realize that you don’t need to own a property to profit from it. You only need to control the property to harness its money-producing potential.

The way that a lot of new real estate investors first get involved in real estate is by using the buy, fix and sell model. This is a good model, but it requires money to buy the property, money to fix the property, and money (holding and selling costs) to liquidate the property. And if the investor has made any mistakes in estimating the fix-up costs or has miscalculated the dynamics of the selling market, they may see their profit melt away like snow in the hot sun. But there is another way to make good money from fixer properties that doesn’t require much money at all – that model is called wholesaling. In wholesaling, you are not buying and selling properties, you are obtaining and selling contracts.

The wholesale model is very similar to the buy, fix, and sell model with main exception – you never actually buy the property. The basics of the buy, fix, and sell model can be simplified into 10 steps:

1. Find a motivated seller
2. Analyze the deal
3. Present and negotiate the offer
4. Finalize all property and title inspections
5. Fund the transaction
6. Close on the property and take title
7. Repair/refurbish the property
8. Market the property and find a qualified buyer
9. Close with the new buyer
10. Cash your check

The wholesale model can be simplified into seven steps:

1. Find a motivated seller
2. Analyze the deal
3. Present and negotiate the offer
4. Finalize all property and title inspections
5. Find a wholesale buyer
6. Sell your purchase contract to the wholesale buyer
7. Cash your check

The end result is the same, but you just eliminated most of the risk involved with the buy, fix, and sell model. You don’t have to have much money (maybe a small amount for the earnest money deposit), because you are not going to buy the property. You don’t need any money for fixing the property, because you are not going to do any rehab. You don’t need money to make mortgage and utility payments while fixing and selling the property, because you don’t have to sell the property. The only thing you have to do is to find a motivated seller, analyze and negotiate the deal, and find another investor to buy the deal from you.

Now the rehabber stands to make more money than you will on each deal, but they are taking all the risk. On the other hand, it may take several weeks or even months to realize their profit, while the wholesaler gets their profit usually within a few days.

Even though wholesaling is fairly easy and takes little to no money, like every thing else in real estate, it takes time and effort. The key is to get going, take action, and start making lots and lots of offers. Here are the beginning steps to getting started in the real estate wholesaling business:

1. Get educated in the basics of real estate investing.

• Get to know your local market. You need to know how much to discount the selling price to get a quick sale. Where are properties selling and how much they are selling for?
• Learn how to quickly estimate the repair costs for a property.
• Know how to quickly analyze a deal to determine how much you can afford to pay for it. You need to include a reasonable profit for the rehabber (just as if you were going to do the rehabbing yourself) and also add in the profit you want to make from the deal.
• Learn how to deal with motivated sellers and solve their problems.
• Learn how to negotiate a good win-win deal. Your profit will be proportional to your ability to negotiate good deals.
• Learn various exit strategies. Even though you are not going to actually buy the property, the deal you negotiate has to be a good deal for the investor who buys your contract or you won’t be able to sell the contract.

2. Start building a good wholesale buyer’s list. As you talk to other investors who are your potential contract buyers, get the following information: their buying criteria including location and price range, their ability to close quick with cash, can they close without getting a loan, their ability to get a loan, and what amount of profit they need in a deal to be interested. This way you can profile your buyer’s list and better match potential contract buyers with a particular deal.

• Call on all the I Buy Homes signs you see as you drive around your area.
• Call on all the I Buy Homes ads in your local papers.
• Call on all the I Buy Homes ads on various internet ad sites like Craig’s List.
• Join your local real estate investors club and meet as many other investors as you can. Join several clubs if they are available. Even driving a few hours to attend club meetings in nearby cities will be worthwhile.
• Run ads in your local papers (as money permits), advertising handyman specials, and fixer-uppers. Calls will come from rehabbers looking for a good deal.

3. Start building a retail buyers list. This would be a list of people who want to buy a fixer-upper to live in. You can sell your contract to an end user as well as to another investor and maybe make even more profit for yourself..

4. Develop methods for finding motivated sellers. The key to successful wholesale investing is finding motivated sellers – only motivated sellers will be willing to sell at a large enough discount to enable you to make a profit. If you ask sellers why are they are selling, you will find out if they only want to sell or if they have to sell. You are looking for those sellers with a problem that have to sell. Your job is to help them solve their problem.

• Have the realtors on your team look for ads in the MLS that indicate a motivated seller
• Screen all the ads in your local papers each day – look for ads that indicate a seller is motivated
• Call on for sale-by-owner signs
• Drive the areas you want to invest in and look for run-down properties and vacant properties. Track down the owners and ask them if they want to sell
• Call on for-rent signs and ask the owners if they would consider selling. Be sure to ask if they have other properties they might be interested in selling
• As you make money from your wholesaling, be sure to put some of it into a marketing fund. That way you can start running your own We Buy Homes ads, put out We Buy Homes bandit sign, and eventually develop a post card or yellow-letter advertising campaign. A good advertising campaign will produce a steady stream of sellers calling you
• Develop an army of bird-dogs to find properties for you who get paid when you get your check from the sale/assignment of the contract

5. Become good at solving the seller’s problems. You must provide benefits to the seller. One of the biggest benefits you can offer is peace of mind, which come with a smooth and easy deal.

• Be prepared to do business by quickly analyzing the property
• Make offers quickly
• Follow-up in a timely manner
• Perform all inspections as soon as possible
• Take care of all the details
• Offer to take care of all the paperwork and all the closing arrangements
• Have a good buyer’s list (and a method to quickly contact your potential buyers with the details of the deal), so you can get the contract sold quickly
• Close as fast as possible (you wholesale buyer will actually close, but you need to make sure everything falls into place)
• Even though you will get your check when you sell/assign the contract, stay involved and do your best to make sure the deal actually closes
• Provide superior service that will set you apart from the crowd

6. Become a good transaction engineer. You want to become a source of profitable transactions for your fellow investors. If you always leave a good profit in the deal for the investor (or homeowner) who buys your contract, you will have repeat customers. You will have investors calling you to find deals for them. Your buyer’s list will grow and finding a buyer for your negotiated contracts will, eventually, only be a matter of sending out an email to your list and taking the best offer you get. Your own profits will grow as you get a reputation as being the go-to guy for profitable wholesale deals.

Wholesaling can get you into the real estate investing game even if you lack cash and have bad credit. Don’t let the lack of money keep you from your dream of real estate investing. You can do it. In fact, a lack of money can be a big advantage to a new investor. It forces you to be creative and find ways to buy property without money. It also forces you to find sources of other people’s money that will serve you very well throughout your investing career.

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In this two-part series, the most common option myths will be explored and debunked. By better understanding the fallacy of these myths, you will be prepared to use options properly!

Myth #1: It’s cheaper to let options expire worthless.

While I’m not really sure how pervasive this myth is, a few traders have certainly been duped into letting an option expire before realizing that doing so is not always cheaper.

The first problem with making blanket statements about options, such as the aforementioned myth, is there are so many different types of strategies and scenarios that it's quite near impossible to state that one technique is better all the time. Are there scenarios in which allowing an option to expire is cheaper? Sure, but there are many more scenarios in which allowing an option to expire is more expensive.

Let’s recap what happens with options expiration. At expiration, an option will reside either out-of-the-money (OTM) or in-the-money (ITM). All OTM options expire worthless, and all ITM options are automatically exercised. As an option trader, there are only four different scenarios that may play out with your option positions at expiration:

• Long OTM option
• Long ITM option
• Short ITM option
• Short OTM option

Because each situation is unique, each one is evaluated individually.

Long OTM options
If you are long an OTM call or put option that remains OTM, riding to expiration will only cause you to lose more money, as the option value will continue to erode until it expires worthless. Therefore, unless you anticipate that the stock will experience a strong enough move to put your option ITM, it is usually better to exit long OTM option positions prior to expiration to salvage whatever value is left in the option.

Long ITM options
Like long OTM options, it is also more expensive to ride a long ITM option position to expiration. As stated, ITM options are automatically exercised; thus, riding an ITM call (put) to expiration will result in you having to buy (sell) 100 shares of the underlying stock. Coming up with the capital required to buy (short) shares is obviously more expensive than merely selling the option before expiration.

Short ITM options
Suppose that one is short an ITM call or put. Would riding to expiration be cheaper than closing it out prior to expiration? Yet again, the answer is no. Short ITM calls would automatically be assigned, resulting in having to sell 100 shares of stock at the strike price. Rest assured, the margin required to short 100 shares is going to be greater than whatever it costs to close out the short call prior to expiration. On the other hand, allowing a short put option to expire ITM will result in having to buy 100 shares at the strike price. The capital outlay required for that is obviously going to exceed the minimal cash required to close the trade prior to expiration.

In the case of a covered call (long 100 shares and short ITM call), you may want to ride to expiration and allow assignment, but it's not necessarily cheaper than closing prior to expiration as the myth purports.

Short OTM options

That brings us to the fourth and final scenario: riding short OTM options to expiration. This is the most common scenario where it is cheaper to ride an option to expiration. For example, suppose I'm short a naked OTM put option that is worth $.05 and has a week until expiration. Consider the following two scenarios:

1. I could close the trade now by buying to close the put for $.05. In addition to paying the $.05, I would also pay commission for the trade.

2. I could also ride to expiration and allow the OTM put option to expire worthless. This results in pocketing the remaining $.05 and avoiding having to pay commission.

Although it would be cheaper to ride to expiration, this assumes the option remains OTM. What if the stock undergoes a gigantic move the last few days before expiration, resulting in your short option moving ITM by a dollar? That option, which was trading at $.05, is now trading at $1.00. In retrospect, you will kick yourself for not buying it back at $.05 when you had the chance. That's the risk you run when trying to eke out every last penny of a short option's premium. My experience has taught me to buy back any short options that are almost worthless (maybe $.15 or less). It might not be a bad idea for you to at least consider the benefits of foregoing the last few dollars in exchange for eliminating risk.

Myth #2: Option volume is a directional indicator.

One of the most common ways traders use option volume is by looking for huge increases in volume (number of contracts traded) in an effort to identify big traders that may know something about such events as a future take over, FDA announcement, or other news likely to drastically move the stock. In other words, the options market may be tipping its hand and hinting at a potential big move in the underlying stock.
At first blush it may seem as if identifying abnormal option volume is a great way to find out when a stock is poised to make a big move. However, there are a few caveats that make option volume a bit more complex than it seems.

First, volume is relative. In other words, high volume for Microsoft (MSFT) options is completely different than high volume for Chipotle (CMG) options. So don't be too quick to think that 5,000 contracts, which is definitely high volume for CMG, represent high volume for MSFT. Make sure you familiarize yourself with the average number of contracts traded for a specific stock before trying to identify what qualifies as high volume.

Second, for every buyer there is a seller. In other words, if there are five contracts traded today, there were both five contracts bought and five contracts sold. Consequently, you can't merely look at the total amount of contracts that traded and discern whether they were buying or selling the options. Unfortunately, you have to dig a bit deeper and see whether or not they traded on the Ask, which implies the options were bought, or the Bid, which implies the options were sold. Furthermore, even if you found out if they were bought or sold, you don't necessarily know what strategy the options buyer are utilizing. Suppose you find out a big buyer came in and purchased a ton of out-of-the-money puts. While your initial thought may be that they are placing a bearish bet, they may actually be bullish by already owning shares in the underlying stock and merely want to buy protection, or perhaps they were entering a put vertical or calendar spread. The bottom line is that it's tough to identify a huge increase in open interest or volume and know what it means. Some traders may enjoy using abnormal volume in their option trading, but it's not really my cup of tea. There's too much other, easier to discern, information that one can use.

Third, for every good signal you get from abnormal option volume, there are probably two or three signals that don't come to fruition. With all the take-over chatter that's out there, you are bound to have numerous abnormal volume trades occurring as people speculate on the rumors, but, in reality, few big winners really occur. It is sometimes difficult to discern what exactly differentiates a good abnormal volume trade from a bad one. There is always a lot of random speculation within the options market. In the end, there are a ton of other signals, such as technical analysis, we could use for predicting stock direction before looking at abnormal option volume.

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Our first blog contest was such a success that we’ve decided to open the doors again. Here’s your second chance to help expose Conspiracy of the Rich online, and earn the chance to win a $5,000 prize from Rich Dad!

If you have a Blog, a Facebook, or a MySpace page, we need you - and we have the right tools for you! Simply register on www.conspiracyoftherich.com as a Conspiracy Blogger to gain access to our free blogger tools for your personal pages.

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The reader interaction for Conspiracy of the Rich was amazing. Thank you! Your input helped shape Robert’s thoughts, and contributed to what Robert considers his most important book yet. Look for the print version of Conspiracy of the Rich incorporating select reader comments and a bonus “Q&A” chapter in a store near you in mid-September.

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In the third installment of The Four Main Causes of Negative Emotions, a preview of his upcoming book on leadership entrepreneurship, Robert Kiyosaki talks about the lack of consideration and how that feeds negative emotions. Rather than wallow in other’s lack of consideration towards you, Robert writes, focus on how you are treating others.

Give what you want. If you feel any kind of lack, for example, a lack of recognition, lack of love, lack of happiness, lack of money, it could be that you are not giving what you want…If you want more recognition, give more recognition. One of the more valuable lessons I learned in military school was to take responsibility for things that go wrong and give credit for your success to others.

Excerpt from The Four Main Causes of Negative Emotions

This is a sneak peak at this exciting new book, written exclusively for Conspiracy of the Rich members. Click here to read more!

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We all know the definition of stupidity is doing the same thing over and over again and expecting different results. Yet, isn’t that what conventional investing advice asks of us – to keep investing for the long term, even when markets are crashing, and expect different results?

"In my lifetime, I have lost a lot of money. Yet with most losses came a valuable lesson. The primary reason I say this caller is asking a stupid question is because I believe she not only is failing to learn a lesson, she is actively making the same mistake. She is living out the definition of stupidity: Doing the same thing over and over again, and expecting different results."

Read Robert Kiyosaki’s third installment of his bonus column, Stupid Answers to Stupid Financial Questions, written exclusively for the Conspiracy of the Rich community, and learn how to recognize stupid financial questions – and more importantly the stupid answers to them.

Go to: http://conspiracyoftherich.com/ to read more

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According to Wikipedia, “A stock exchange, securities exchange, or (in Europe) Bourse is a corporation or mutual organization which provides trading facilities for stock brokers and traders, to trade stocks and other securities.” Facilities are also provided for the payment of income and dividends, as well as the issue and redemption of securities. In order for a stock to be traded on a certain stock exchange, it must be listed there, although this is becoming less and less popular due to the advent of electronic trading through the Electronic Communication Networks (ECNs). Trading through ECNs not only helps keep transaction cost low, but also offers the advantage of speed.

Everyone knows the New York Stock Exchange is in New York City, but where did stock exchanges come from? The first brokers are believed to have come from 11th century France, where managing and regulating the debts of agricultural communities on behalf of the banks became a concern because these brokers traded in debts. It is believed that commodity traders in Bruges gathered at the house of a man named Van der Burse in the late 13th century. This informal meeting was institutionalized in 1309 and became the Bruges Bourse. This idea spread quickly around Flanders, and Bourse soon opened in Ghent and Amsterdam.

Trading in government securities by Venetian bankers began in the middle of the 13th century. During the 14th century, people started trading in government securities in Pisa, Verona, Genoa, and Florence. Joint stock companies were later started by the Dutch. Shareholders were able to invest in ventures and receive a share of the profits or losses. The first company to issue stocks and bonds was the Amsterdam Stock Exchange. The first shares were issued on the Amsterdam Stock Exchange by the Dutch East India Company in 1602. London began trading stocks on a stock exchange in 1688.

Under a buttonwood tree, 24 New York City stockbrokers started the New York Stock Exchange on May 17, 1792, by signing the Buttonwood Agreement. The Buttonwood Agreement was the New York Stock Exchange’s commitment to investors and issuers. They eventually moved to the Tontine Coffee House to trade, while other brokers traded in the street. The first stock listed on the NYSE was the Bank of New York; there were five original stocks listed. The first NYSE members were the 24 brokers who signed the Buttonwood Agreement.

The American Stock Exchange (AMEX) in the 1800s, originally know as the curb market because trading was done outside on the curb of Broad Street in New York, began trading government securities. As the noise from so many trades increased, hand signals were created. The exchange moved indoors to its current location on Trinity Place in 1921. It was given the name of American Stock Exchange in 1953.

The AMEX is one of the largest option exchanges in the world, with more than 1,700 options traded on stocks, American Depository Receipts (ADRs), Exchange Traded Funds (ETF’s), indexes, and holders. The AMEX was the first market to trade in ETFs so they have a very extensive market in these funds. Listed on the AMEX are more than 140 ETFs on corporate bond indexes, general stock markets, industries, and more.

The AMEX is an auction market, and it conducts its trading business on a trading floor through brokers and specialists. The job of a specialist is to bring buyers and sellers together and to make sure a fair market price is received for both; each security traded on the exchange is handled by a specialist. Making sure a market remains liquid is also the job of the specialist, and this includes filling orders from his own account if no one is there to take the other side of a trade. Buy and sell orders are brought to the specialist by brokers, who move around the floor to the different specialist, bringing them orders on behalf of their clients.

In 1971, the first electronic stock exchange in the world was created: the NASDAQ. The purpose of its creation was to develop a means that would increase trading of over-the-counter (OTC) stocks, meaning those stocks which could not meet listing requirements for larger exchanges. February 8, 1971, was its first trading day, and more than 2,500 OTC stocks were traded on that first day.

In the 1990s, the NASDAQ started to become a major competitor to the NYSE. In 1994, for the first time, the NYSE came in second to the NASDAQ in annual shares traded. In 1998, the American Stock Exchange merged with the NASDAQ, this merger created the NASDAQ-AMEX Market Group. This helped both exchanges to better compete with the largest exchange in the country, the New York Stock exchange. They both, however, still operate separately.

The first truly global market place was created in 2007 with the merger of the NYSE Group and Euronext. This historic combination marked a milestone for global financial markets. Major historic market places across Europe and the United States were brought together that span more than four centuries of trading. This combination was by far the largest of its kind.

Posted 08:32 AM | Permalink | Comments (0) | TrackBacks (0)

If you live on the planet earth, you are involved in real estate. Everywhere you look, real estate deals abound. The gas station is someone’s real estate deal, and so is the local McDonald’s. And in real estate, there are winners and losers. Money is always flowing somewhere. The question is: Where is your money flowing?

"Someone is always making money from real estate. Like it or not, we’re all in the real estate business."

Read Robert Kiyosaki’s second installment of his bonus column, Stupid Answers to Stupid Financial Questions, written exclusively for the Conspiracy of the Rich community, and learn how to recognize stupid financial questions – and more importantly the stupid answers to them.

Go to: http://conspiracyoftherich.com/exclusive-6 to read more

Posted 10:19 AM | Permalink | Comments (0) | TrackBacks (0)

The reader interaction for Conspiracy of the Rich was amazing. Thank you! Your input helped shape Robert's thoughts, and contributed to what Robert considers his most important book yet.

Look for the print version of Conspiracy of the Rich incorporating select reader comments and a bonus “Q&A” chapter in a store near you on September 21st.

Posted 10:19 PM | Permalink | Comments (0) | TrackBacks (0)

For a real estate investor one of the most important steps in establishing credibility is to carve out a niche as the local “go-to” person for real estate problem solving. You must gain people’s trust by teaching them, not by “pitching” them. There are many traditional ways to teach and educate people. You can provide information through letters, postcards, fliers, newsletters, press releases, articles, and speaking engagements at civic clubs, real estate investment clubs, real estate company meetings, and educational seminars. You can also educate people through paid advertisements, TV infomercials, press releases, and radio talk shows. All of these are venues by which you can educate people, thereby establishing yourself as the local real estate expert.

But in today’s fast-paced world, nothing beats the amazing power and speed of the internet for rapidly building your credibility. By using the internet, an anonymous real estate investor can become a highly respected authority almost overnight!

Let’s take a look at the internet and see why it should be one of the main tools you use to quickly create your credibility.

Timothy Berners-Lee, inventor of the world wide web (no, it wasn’t Al Gore who invented the internet) recently said in an interview with BBC News (April 2008), “The internet is still in its infancy.” Bill Gates of Microsoft said, “If your business is not on the internet, then your business will be out of business.”

Did you know that more people are now getting their information from the internet than from newspapers? Newspaper subscriptions, for the most part, are falling, while internet usage is skyrocketing. We are even at a point where more people are using the internet to entertain themselves than are watching TV. Can you see the trends? If you want to get information out to people as fast as possible, the internet is the obvious choice.

There are numerous ways to use the internet to get your educational and business information out to the world. And with continually improving technology and software programs, using the internet has never been easier, even for those of us who, by our own admission, are internet-impaired. Let’s review some of the ways one can use the world wide web to make his or her information available for the world to see:

1. Create a website. This is the traditional way of gaining a presence on the web, and is one of the best ways to promote yourself and your business. Your site doesn’t have to be expensive or fancy, but it should have lots of good educational content. If the information you provide on your website is relevant and useful to your visitors, they will keep coming back for more. You will be positioning yourself as a real estate problem-solving expert, and will gain the trust of your visitors. Many of those visitors will become clients who will sell you their home, buy a home from you, or refer business to you.

Setting up a website is really not that hard. There are numerous companies that will create a website for you, as well as services that will help you create your own website. Your budget and time constraints will dictate which option is best for you. A search for “website development” using Google or another search engine will aid you in finding the help you need for developing your website. There are many good sites, so do a search and choose a service that meets your needs and is within your desired price range.

2. Create a blog. What is a blog? Blogging is contributing content to a web log (blog) that is published online. The fact that the information is published to the internet means it is accessible to millions upon millions of internet users worldwide. Blogs can be as simple as a page of someone’s thoughts, or as complicated as a large, interactive resource provider. While blogging used to be dominated by individuals with some web knowledge, it is now being used by the masses. Even large corporations such as Ford, McDonalds, Time Warner, Wal-Mart, and Nike maintain company blogs; if you become a blogger, you are in good company.

Don’t worry; you don’t have to know a lot about computer languages and programming. You don’t even need to have a website, although if you do, you can use your blog to drive traffic to your website, where you can have more information and good content for your visitors. Setting up a blog is very easy. There are a large variety of blogging platforms that exist to help individuals and businesses establish and run their own blogs. Some of the most well-known blogging platforms are:

www.blogger.com

www.typepad.com

www.wordpress.org

www.b2evolution.net

www.livejournal.com

www.geeklog.com

www.blogdrive.com

There are many other blogging platforms out there; do a search and find the system that works best for you.

There is one thing to keep in mind if you become a blogger. You need to post new and relevant information on your blog as often as possible; it doesn’t have to be a lot of material, just good material. Some people post every day, but posting once a week should keep your visitors happy and coming back for more information. The whole idea is to get (and keep) as many visitors as possible coming to your blog. Consistently posting good content on your blog will help you accomplish this goal, although this is only part of the formula.
Once your blog is up and running, you will want to make sure your blog is listed with as many blog directories and communities as possible. This will drive more traffic to your blog site. Here are a few blog directories; do a search for a more complete list:

www.bloguniverse.com

www.blogtoplist.com

www.blogarama.com

www.blogrush.com

3. Join social networking sites. Social networking sites have become very popular in recent years, and it seems that new sites are being developed every few months. Some of the most popular sites are YouTube, MySpace, Facebook, Twitter, and Squidoo. Social networking sites are no longer just for your teenagers to post a few pictures (or a lot of pictures) and a personal profile. These social networking sites are really, really, really big business. In fact, one company that tracks website traffic, Comscore, indicates that in March 2008, 84.8 million viewers watched videos on YouTube. Facebook had more than 73 million visitors in January 2009, MySpace had more than 53 million, and Squidoo had close to 5 million visitors. And yes, in the news just this last week was an article on how some in the U.S. Congress were using Twitter to communicate (only on critical issues, of course).

So what does this mean to you? It means that social networking sites can be
very effective in driving traffic to your blogs and/or websites. So get with
your teenagers and have them help you set up your profile on Facebook and
MySpace, or even put a video on YouTube! You don’t need expensive video equipment anymore. An inexpensive flip camera can do an excellent job.

4. Utilize social bookmarking sites. Social bookmarking sites are another way to promote blog sites and get the attention of new readers and potential clients. These sites can be used to increase the number of other blogs and sites that link to your own blog, thus increasing traffic. A few of the many social bookmarking sites are:

www.stumbleupon.com

www.linkroll.com

www.feedmelinks.com/portal

www.digg.com

5. Create and use a signature. Whenever you send an email, be sure to add your signature box to the end of the email. In the signature box, along with other contact information, you can put a link to your blog or website. This is powerful! It gives people a chance to go to your blog or website without you having to give them a sales pitch about visiting your sites. It is amazing how many people who receive your emails will click on your link just out of curiosity. Once they are on your blogs and/or websites, they will find all sorts of quality educational material that will benefit them. Also, if you participate in any of the many online message board communities that allow posters to have signatures, you can add your link there as well.

As you can see, there are many ways for a person to gain a presence on the internet. If you don’t have a presence on the internet, you become invisible. One of the first things people do nowadays when they are introduced to a professional or a business is to Google or similarly research the individual or company. If they can’t find you or your business online, they may think you are not serious about your business or qualified to help them. Creating this reaction in your clientele pool will cost you credibility, and without credibility, you won’t have much business.

With Web 2.0, you don’t have to know anything about programming or programming languages to gain a presence on the internet. All the work is pretty much done for you, as when one paints by numbers. When you log onto almost any of these sites, you will be walked through the steps needed to get you started. If you can click the mouse, you can successfully build a blog or a website. And if you run into trouble, just ask your 10-year-old for help. He or she can have you up and running in no time!

Note: “This sample list of website resources is provided solely for educational purposes and as a convenience. Any listing does not imply sponsorship, endorsement or approval of any website, its sponsors, products and/or services offered therein, or by any advertiser therein. We do not maintain the site(s) or assume any responsibility for the accuracy, content and current status of any information provided. Please note that the locations on the site(s) can change without notice.”

Posted 11:26 AM | Permalink | Comments (0) | TrackBacks (0)