Friday, August 14th, 2015

does anyone know how option trading works, far as calls and puts, and how money is made off of this strategy.?


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    7 Responses to “does anyone know how option trading works, far as calls and puts, and how money is made off of this strategy.?”
    1. Block B says:

      Hi,

      You can visit http://stocksguide.checkouttoday.info for some useful tips and info related to your query. Good luck!

    2. Franco says:

      Essentially, you make a guess on what the price of a share will be some time in the future and you place a bet on it.

      Leave it alone. It is sheer gambling and you will be playing against experienced professionals with the best computer programs etc. They will eat you alive.

    3. Ron says:

      Okay, I’m not on the same boat as people saying “stay away from it”. I feel that as long as you have money you want to speculate with, go for it.

      Options work like stocks. For example, I’ve been watching the Apple options lately to see what they are doing. This is a prime example of option volatility. Just yesterday morning, Apple’s stock (AAPL) was $144 per share. The call option with a strike price of $100 was priced at $45 premium. This means for $45, you have the option to purchase 1 share of Apple for $100. Here’s where you make money…last Friday when the stock was $136, the same call option with a strike price of $100 was priced at $38. If you would have bought the call option then and sold yesterday, you would have made $7. This doesn’t seem like a lot per share but options sell “per contract”. Each contract represents 100 shares. Multiply the premium by 100…you would have made $700.

      If you would have purchased the stock, you would have had to invest $13,600 ($136 x 100 shares). Rather than doing that, you only invested $3800 to make $4500.

      However, on the news that Apple dropped their iPhone price by $200, the stock went back down to $133. The above mentioned call option is priced at just over $33. This means you bought the option for $38 and can sell it for $33 for a loss of $5 ($500 per contract). Still better than losing $11,000 on the stock.

      Now, do options really seem more risky than the stock itself? Not really, you just need to understand them. If you don’t, that’s when people will tell you to stay away.

      Ron, ChFC
      Investment Advisor

    4. HH@20 says:

      Just read Ron’s description and it is very good, except, if you buy a stock you should be holding it for a longer period of time. An option has an expiration date. The longer the time between when you buy the option and when it expires the higher the premium. The premium is the difference between the stike price and the cost of the option. On the 100 call and the price is 135 and the option is 38. The premium is $3.

    5. adam k says:

      Ron’s answer was professional but totally onesided. Sure, you can make money, but it’s like going to the racetrack or shooting craps; the house always wins. Before you invest educate yourself. Keep in mind that many more people lose money in options than come out ahead. For people starting in investing the best policy is go slow and conserve your capital to fight another day. You should also decide wether you want to play the market or invest in it. A world of a difference.

    6. Barney says:

      CALL options are not always the way to go. CALL options do best in Bull market conditions where a PUT option is most profitable in a Bear market or market correction. Those are two very basic option strategies. Each one depends on market sentiment, momentum, and the overall trend of that market. The are many other options investors play depending on their strategies and tolerance for risk. There are Bull spreads, Bear spreads, known as straddles and strangles. An investor can buy two CALLs on a position, or they can buy A CALL option and a PUT option on the same stock. They can mix and use options in any manor that suits their investment strategy. Options give the investor leverage against great loss or greater % of gain. They can be used for monthly income or insurence against lossing everything. visit http://investools.com

    7. Sang Suci says:

      Options are insurances. When you sell, whether they’re puts or calls, you’re selling insurance. You take away uncertainty (risk) from the buyers. And you’re compensated for that (in the form of premiums).

      When you buy, on the other hand, you expect the price to move. Whether it’s up or down is irrelevant. You can always construct a strategy to exploit your view about the price movement. A good book on option basic will show you how.

      Good luck with your trading.

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