"An ingenious method of almost printing money NOW by selling puts on growth stocks is detailed. A re-investment of this capital is like being given a large loan by the bank that has negative interest on it. Kudos.

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The explanations are crystal clear, the examples make sense, and the strategies are profitable.

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Kurtis Hemmerling

How to detect risky stocks

Although there are quite a lot ways of measuring the risk of a stock I want to concentrate on the most important one which is also the easiest to detect. The one figure which deserves a closer look is debt or better the debt-to-equity ratio. 
Think about a person who wants to take a credit from a bank. If this person is already highly in debt do you think he will get the credit without any restriction? Maybe the bank will decline his request at all. But if he gets the credit then it will probably be approved only with higher interest rates or only a low loan value. That’s because this person is risky in so far as he could not pay back his loan in full or could be in delay when paying his interest rates or amortization. Thus, the interest rate for this person must be adapted.
But if this same person has a high debt level and earns a lot of money (=equity) then the interest rate could be still low or only slightly adapted. 

The same can be said to stocks. Always look how the debt/equity level of the company you want to analyze is. The higher it is the more volatile or riskier the stock becomes. You can also take the total capital (debt + equity) and use it instead of the equity in the ratio:
debt/total capital. Here you calculate the fraction of the debt on the total capital. The higher it is, the worse the situation of the company.

But generally the first version is taken to assess the risk of a stock.
Lets assume company X has 1000$ of debt and 500$ of equity. Then you get 1000/500 = 2 or 200%. That means X has twice as much debt as equity. That is generally regarded as too much.
You also have to pay attention to the credit type that was taken. If the company has a lot of long-term credits (> 3 years) then it has much time to pay it back. But in the case of short term debt (< 1 year), the company has to pay the whole sum back in the same year. That could harm the business a lot!

It’s of course the best if you could find stocks with zero or almost zero debt. These are the companies with the lowest risk (based on this figure alone). 

The most used Stock Valuation method, however, does not include this important matter of debt level.