as i understand, it's a bet that drys will be at 5$ or hiigher on 9/18/10
i pay .25 each, if the stock doesn't reach 5$ by then, they are worthless, let's say the stock sees 5+$ anytime between now and then, how does it pay out?
are there minimum amounts you have to buy with calls, or can i just do a small bet to try it out?
To remove first post, remove entire topic.
was wondering if you could help me out here
was looking at DRYS sep 18 calls 5$
looks like they are 0.25
can you explain how these work
as i understand, it's a bet that drys will be at 5$ or hiigher on 9/18/10
i pay .25 each, if the stock doesn't reach 5$ by then, they are worthless, let's say the stock sees 5+$ anytime between now and then, how does it pay out?
are there minimum amounts you have to buy with calls, or can i just do a small bet to try it out?
The fine points are that .25 really is 25 bucks per contract as a contract controls 100 shares of stock.
The issue with trading options is that if you do small trades like that, say one contract at 25 bucks, well the commish is almost 15-20 just to do the trade so the fees to trade make it not worth it.
I dont like that trade btw..its not a good risk/reward given what a mutt the stock is. I got killed on trading options with DRYS, but relative to my total portfolio it wasnt a big deal. The big deal was what I HAD at the top and where the stupid stock went.
You want to do options on higher priced stocks to leverage, at 4 bucks I would just go long the stock.
To answer though, you can trade one contract and it would run you the 25 (I think it is 26 to 27 bucks now) plus commish to buy and sell and yes if the stock stays below 5 and the expiry date passes the money is fully lost (as I well know).
be easy,
You have it pretty much correct.
The fine points are that .25 really is 25 bucks per contract as a contract controls 100 shares of stock.
The issue with trading options is that if you do small trades like that, say one contract at 25 bucks, well the commish is almost 15-20 just to do the trade so the fees to trade make it not worth it.
I dont like that trade btw..its not a good risk/reward given what a mutt the stock is. I got killed on trading options with DRYS, but relative to my total portfolio it wasnt a big deal. The big deal was what I HAD at the top and where the stupid stock went.
You want to do options on higher priced stocks to leverage, at 4 bucks I would just go long the stock.
To answer though, you can trade one contract and it would run you the 25 (I think it is 26 to 27 bucks now) plus commish to buy and sell and yes if the stock stays below 5 and the expiry date passes the money is fully lost (as I well know).
would that mean a profit of 1000$ on a 260$ trade?(1 lot of calls?)
i understand how it works, just confused on the lingo and all
someone thinks there is some hope for that stock, the dec 10 5$ calls are almost .50
it's my opinion that everything is going up. for all the wrong reasons, but i'm looking to bet accordingly. maybe i should do some longer term WFC of C calls, gotta think WFC is destined for triple digits once the Fed rinses out those 1.25 T of junk morts. they are certainly TBTF and have a decent history. if their bet in buying wachovia was that they knew the gov't would end up making good on all those junk morts, they are poised to push forward on their recent 400% run up
so let's say the stock is at 6 on sep 1 2010
would that mean a profit of 1000$ on a 260$ trade?(1 lot of calls?)
i understand how it works, just confused on the lingo and all
someone thinks there is some hope for that stock, the dec 10 5$ calls are almost .50
it's my opinion that everything is going up. for all the wrong reasons, but i'm looking to bet accordingly. maybe i should do some longer term WFC of C calls, gotta think WFC is destined for triple digits once the Fed rinses out those 1.25 T of junk morts. they are certainly TBTF and have a decent history. if their bet in buying wachovia was that they knew the gov't would end up making good on all those junk morts, they are poised to push forward on their recent 400% run up
I would actually do a covered call based on the price of those options.
Go long the stock at 4 bucks, sell the Dec 5 CC at 50 cents, it lowers the cost basis down to 3.50 on the stock, if the stock passes 5 you get called out and get the 50 cents in option premium..
Total return is 1 buck on the stock and 50 cents on the option, 1.50 per a 4 dollar stock, that is a 37% return and the potential that you could still own the stock, keep the option premium and lower your basis.
Or even better, if DRYS drops to say 3.85, go long the stock and wait to see if the stock rallies past 4 and say to 4.25 to 4.50, those options will start heating up and it will increase your return even more.
CC the stock, dont go long options down here..they are too diluted to run much, but yes you are right..250 invested in 10 contracts, stock hits 6 bucks and those options are worth at least 1000. The earlier it comes to 6 the more those options are worth..
I dont like WFC or C long options..lets see if we get that summer swoon and the risk comes back in on their CDO and other derivative portfolios with margin calls and valuation etc..it hasnt gone away as we all know.
I would actually do a covered call based on the price of those options.
Go long the stock at 4 bucks, sell the Dec 5 CC at 50 cents, it lowers the cost basis down to 3.50 on the stock, if the stock passes 5 you get called out and get the 50 cents in option premium..
Total return is 1 buck on the stock and 50 cents on the option, 1.50 per a 4 dollar stock, that is a 37% return and the potential that you could still own the stock, keep the option premium and lower your basis.
Or even better, if DRYS drops to say 3.85, go long the stock and wait to see if the stock rallies past 4 and say to 4.25 to 4.50, those options will start heating up and it will increase your return even more.
CC the stock, dont go long options down here..they are too diluted to run much, but yes you are right..250 invested in 10 contracts, stock hits 6 bucks and those options are worth at least 1000. The earlier it comes to 6 the more those options are worth..
I dont like WFC or C long options..lets see if we get that summer swoon and the risk comes back in on their CDO and other derivative portfolios with margin calls and valuation etc..it hasnt gone away as we all know.
Well, i had the right idea here, and had i listened to post 4, would have made some coin,,,,,,,
So sixth months ago i posted that you had to think WFC is on it's way to triple digits, it runs up 30% and now i'm clambering to buy puts. This is so much more fun then betting sports
Well, i had the right idea here, and had i listened to post 4, would have made some coin,,,,,,,
So sixth months ago i posted that you had to think WFC is on it's way to triple digits, it runs up 30% and now i'm clambering to buy puts. This is so much more fun then betting sports
Hot Forum Topics
