Do you want to make a lot of money in stocks while minimizing your risk of losing money?

Of course, we all do, but the smartest investors actually do this!

What is their secret? They trade stocks by using options instead of simply buying and selling stocks. Options trading lets you hedge your risks and leverage your investments.

You may have heard of options trading but have no idea how to do it. For basics on options trading, there are some free online tutorials at sites such as The Options Institute or YouTube, as in this video "Intro to Options" ► ►

But the most extensive help for both options trading beginners and veterans can be found in the best books on this subject, books that you can get through San José Public Library.

Some consensus best books for options trading beginners are:

• Fundamentals of the Options Market by Michael Williams (2001) – Everything you need to know to get started (Preview book & Amazon reviews). Request book via Link+ (What is Link+)
   
• Understanding Options by Michael Sincere (2006) – Easy-to-read instruction and advice on the basics of options trading (Preview book & Amazon reviews). Request book via Link+ (What is Link+)
   
• Options Trading for the Conservative Investor by Michael C. Thomsett (2010) – Covers not only trading basics but strategies for minimizing risk, i.e., where the "conservative" comes in (Amazon reviews). Read online now as a Library ebook

The library also provides you access to recommended books for options trading veterans:

• Options as a Strategic Investment by Lawrence G. McMillan (2002) – Detailed and comprehensive must-read from a legendary options analyst will help you develop your own successful trading and equity-research strategies (Preview book & Amazon reviews). Available at the Library or Request book via Link+ (What is Link+)
   
• Options Made Easy: Your Guide to Profitable Trading by Guy Cohen (2005) – Not a beginner’s book, this one covers a multitude of options strategies and tests each strategy for risk and other factors (Amazon reviews). Request book via Link+ (What is Link+)

If you are interested in other books on options trading, you can browse the Library Catalog for the subject Options (Finance).

And please send in your comments if you have your own favorite options books or you would like me to add companies to the stock ticker above.

Happy trades to you!

Americans love tax cuts. If recent polls can be believed, the extension of the Bush Tax Cuts for everyone making up to a zillion dollars a year is a wildly popular “compromise” despite the hundreds of billions of dollars it will add to an already huge federal debt. What effect do you think continuing these tax rates at least another 2 years will have on important human circumstances, such as unemployment?

Despite nearly a trillion dollars in economic stimulus and nearly a trillion dollars in cash held by nonfinancial U.S. companies, the official national unemployment rate was 9.8% for November 2010. With the extension of the tax cuts, what do you think this rate will be one year from now, in November 2011?

If you want to guess, just comment on this post and include your estimate. If 3+ people comment, I will revisit the post one year from now to see who forecasted most accurately. By the way, my guess, for what it's worth, is 8.7%. (I hope that next November’s rate is actually much lower than that!)

If you would rather read up on the subject of tax and economic policy before making your estimate, here are some recommendations:

Winner-Take-All Politics: How Washington Made the Rich Richer — and Turned Its Back on the Middle Class (2010), by Jacob S. Hacker and Paul Pierson, is a remarkably prescient book especially in light of the recent tax deal, with a chapter titled “Democrats Climb Aboard.” The book is also an enjoyable read despite what could be a dry and somewhat depressing subject. Beginning with our current economic meltdown that barely grazed investment bankers, hedge fund managers, professional athletes, and CEOs, the book argues convincingly that it is mostly political transformations of the past 35 years rather than technological or business transformations that have resulted in historically large income inequality, jobless “recoveries,” bailouts of giant corporations, off-shoring of jobs, ever increasing corporate lobbying, etc. This is a must-read if you want to understand why the Main Street economy and government budgets are in the mess… er, state they are in.

Freefall: America, Free Markets, and the Sinking of the World Economy (2010), by Joseph Stiglitz, is a well-written book on the causes and solutions of our current economic crisis. Nobel Prize-Winning Professor Stiglitz writes for the common reader and documents his list of what caused the economic “freefall” that began circa 2008: financial deregulation, Fed and government policies that led to credit and housing bubbles, financial consolidation among several “too-big-to-fail” corporations, etc. The book begins with a lead-up to the crisis, caused by reckless business practices ignored by regulators and enabled by a sense of invincibility due to repeated financial bailouts; continues with the “Freefall and Its Aftermath;” criticizes the response to the crisis by the federal government and the Fed, in such chapters as “A Flawed Response” and “The Great American Robbery;” and concludes with specific solutions to the Great Recession and preventative measures for the future. At least you will know which sound policies will likely be ignored by present and future White Houses and Congresses.

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (2009), by Robert Scheer, has a somewhat simplistic title that hides a readable, fairly well-documented look at what has happened in tax and economic policies over the past 30 years and the present consequences of these policies. The book makes a case that on the subject of taxes, trade policy, economic regulation, etc., the current President and his 3 predecessors have combined to turn the Reagan Presidency into an 8-term-plus administration. Chapters include “The Clinton Bubble” and “Sucking Up to the Bankers.” That President Obama has surrounded himself with Clinton economic advisers and even brought in the ironically named “Bill” Clinton to sell the high-cost bipartisan tax plan is little surprise to readers of the book.

Other recommended books on this subject include:

• Bought and Paid For: the Unholy Alliance between Barack Obama and Wall Street (2010) by Charles Gasparino
• Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) (2007) by David Cay Johnston

Don’t worry: It is possible that trickle-down economics and off-shoring of jobs will finally help everyone this time, as promised.

The essence of this book is in its subtitle. In Breaking Night: A Memoir of Forgiveness, Survival, and My Journey From Homeless to Harvard, Liz Murray shares her amazing true story of breaking away from a family’s self-destructiveness and despair to build a positive and meaningful life. She learns how to survive being neglected by her drug addicted parents through a combination of (1) knowing they love her, (2) forgiving them for being unable to parent her (and her older sister), and (3) forging her own way. Her transformation from a 15-year-old homeless high school dropout to a Harvard University graduate is truly awe-inspiring.

While engrossed in reading Breaking Night, I envisioned it as an excellent feature film. Only later did I read (in the library catalog notes) that in 1999 Murray's story was produced as the Lifetime Original Movie Homeless to Harvard. Have you seen it?

How does the future of society look, to you? It doesn't look too bright according to these recent books that credit the effects of information technology on humans for decreases in reading and other signs of impending societal decline. The fact that these interesting books are not flying off our library shelves kind of supports their arguments, if you get my drift. Check them out.

The Shallows: What the Internet Is Doing to Our Brains by Nicholas Carr is a very well written book positing the view that your behavior on the inherently distracting Internet impedes your ability to achieve deep reading behavior that is necessary for education, professional work, and other endeavors. Carr references scientific research to buttress his claims and is an excellent writer even on a subject that could be hard to make interesting. This is an easy-to-deep-read book.

The Dumbest Generation: How the Digital Age Stupefies Young Americans and Jeopardizes Our Future  by Mark Bauerlein is a book that is hard to stop reading, not because it is well written so much as because it paints a riveting but depressing portrait of Generation Y's educational and intellectual shortcomings. Well documented, the book focuses on the intellect of under-30-year-olds, not only concluding that they are the "dumbest generation" but doing a good job of refuting those academics who contend otherwise.

Distracted: The Erosion of Attention and the Coming Dark Age by Maggie Jackson is an easy-to-read book that includes significant documentation in support of its thesis that modern multitaskers' inability to focus attention will usher in a period of societal decline. Unfortunately, the book itself would be better, if more tightly focused on fewer points and less sensationalistic in predicting a Dark Age due to general inattention.

Related books that are also recommended for this topic are You Are Not a Gadget by Jaron Lanier and The Overflowing Brain: Information Overload and the Limits of Working Memory by Torkel Klingberg.