Exchange traded options are simply a wonderful investment vehicle, because they are just so flexible. If you buy shares, you usually do so with the hope the price of the share will rise over time and you will make a capital gain. But if the market goes against you and the price begins to drop, you are then faced with the "buy, hold and pray" scenario, where you have to wait it out until the price, hopefully, will move back to your original entry price.

Options are not like this. They are not uni-directional investments. If you know how options work, you also know that positions can be easily adjusted to accommodate what the market is telling you. Options are also much more interesting than buying shares or CFDs because they contain a greater variety of components. I'm going to show you how to get rich with options.

We need to discuss option characteristics, which are not available when just buying and selling stocks.

You can create an option contract out of nothing. This is called "writing" an option, which is another way of saying you're "selling" it to the market. So you create, or write, an option contract and sell it to the market, all in the same transaction. This now gives you the choice whether you want to be on the buying or writing end of a market deal.

All option contracts have an expiry date. This being the case, the price of any option includes a "time to expiry" element, as well as any "intrinsic value" due to market price movements. Because the price of an option decays at an exponential rate as the expiry date draws nearer, you can take advantage of this factor by being on the writing rather than the buying side of the market. This is vital information if you want to know how to get rich with options.

Options can be used to take advantage of either an upwards, downwards or sideways move in the market price. Call options increase in value as the price moves north, put options do the same as the underlying security price drops. If you think the share, commodity or currency price is about to make a large move, but in recent times it has been moving sideways, you can buy the same quantity of both calls and puts and make a profit from whichever way the price eventually moves. This is called a "straddle". You buy these when the option price is relatively low and you need to allow enough time to expiry (at least 90 days) for them to do their job - but with the right chart patterns, they work well. We say this only to demonstrate the flexibility of options. There is a better way than this, how to get rich with options.

Now, here's where it gets interesting. If we were to imagine a graph, options contain both vertical and horizontal components. The vertical component is the price movement; the horizontal component is the "time value" based on impending expiry. Combining these two elements with the ability to write (create, sell) as well as buy options, gives us all the flexibility we need to get rich with options.

The ability to write (sell) options, allows us to create positions with very low risk, which can be easily adjusted if the market turns against us, until conditions are better to produce a profit. Combine this with good money management and you can't go wrong.

All option contracts have what is called the "strike price". This is the price at which you accept or give the right, but not the obligation, to buy or sell the underlying security, by a given date. The relationship between the strike price and the current market value of the underlying security, affects the price of the option.

If you SELL a put option with a strike price that is close to, the current market value and at the same time, BUY another put option at a lower strike price - because the bought option is cheaper than the sold option, you create a position known as a "credit spread" because it puts an "up-front" credit into your brokerage account. As long as the share price stays above the strike price of the BOUGHT option strike price, by the expiry date, you get to keep the credit. This is one of the best strategies I have ever used. This is how to get rich with options.

Remember how the option price decays at an exponential rate as we draw near to the expiry date? If we have a credit spread in place, we are using this time decay to our advantage, because we are relying on our SOLD position to become worthless. For this reason, we only set up credit spreads with a short time to expiry, normally 4-6 weeks at most, sometimes less, but definitely not more than that. With rapid time decay, even if the underlying security price falls through our "sold" strike price, we can still make a profit at the expiry date. If it falls too far, we can adjust our position by what is called "rolling out" to a later expiry month and wait for the price to rise again. Or if it looks like the market price is going to crash, we buy back our "sold" put (for a loss) and just keep our "bought" put contract (which was very cheap to buy, being "out of the money" at the time) and let it make enough profit to compensate for the loss on the sold position.

Credit spreads are a very low risk investment strategy. With as little as $20,000 you can replace your monthly income, so imagine what you could do with $50,000 or more, trading the US markets? With a simple but powerful charting technique known as "channeling" you can easily identify opportunities, set up your positions and just wait for them to mature - then keep the money!