Whats a stock option? Whats a put? How do i get rich trading them?
Whats a stock option? Whats a put? How do i get rich trading them?
An option is the right, but not the obligation to either buy or sell shares of a stock.
A call option is the right to buy
A Put option is the right to sell
The price you can buy or sell at is called the strike price.
Options are (generally) sold = 100 shares per contract.
You pay a premium (small amount) to purchase this right.
Example:
"CVS Jan 17 '20 $85 Call @ 4.90"
This means that for 4.90 per share (or $490 + commission) you can buy the right to purchase CVS @$85 per share, and that right expires on January 17, 2020
So, if CVS shares go above $89.90, you can buy shares at $85, and then immediately sell them again at the higher price. (though in real life, you never do that, you simply sell the call itself as a profit.
Next up.... puts
Can someone answer me
dumb frogposter
are you absolutely retarded? the first post in your stupid thread is a 100% correct answer.
Pro tip
You get rich by writing them and taking on unlimited potential risk
Expected volatility is always twice what the actual volatility is
If you need to ask here you should not trade them in the first place
Thanks bro
U fucking brainlet we posted at the same time. Kys
Unironic Intel and PayPal
i'll literally fucking kill u m8. stay poor and broke
Puts.
If you think the price of a stock is going to go down, you have 2 choices.
1. Short the stock, at which point you should be put in a mental institution,
2. Buy put options, which do the same thing but with a fixed risk.
Example:
"GE Jan 17 '20 $27 Put @ $9.40)
Total cost = (9.40 x 100) + Commission
Break Even price = (roughly) $27- Total Cost
So if the price goes down, you can buy the stock at market price, and then sell at a higher price with the option. (though again, almost never happens, you just sell the put at the same profit)
The advantage of puts over shorting is this... with a short you have unlimited risk.
Let's say you short ABC @50. If it goes down, it makes money. But imagine that on a sunday night ABC announces they have discovered the cure for cancer or something.
In this case, it does something called "gapping up", where the price goes up never having crossed prices in the middle.
So ABC now opens on Monday @ $200 per share. Guess what... you know OWE $150 per share, and you damn well better come up with the money.
But with a put, you are always sure that the MOST you can lose is everything you put into it.
Bottom line... you can make slightly more shorting because you don't have to pay the premium. But with shorting you get unlimited risk.
Im just trying to find ways to use my spare 100k in cash. You stay poor
>If you think the price of a stock is going to go down, you have 2 choices.
you could sell calls
Also op you could just use google or even watch a youtube vid
Faggot
woah 100K. i apologize
Yes, but I would never suggest that to someone just starting out.
Unless they have a level 3 options account, they can't sell naked calls.
Though... covered calls are often a good source of income, which i was going to bring up later.
I did but i couldnt understand the terminologySo who buys the contract?
Nice answer, did you copy and paste it from reddit?
Apology accepted
...
If you want to make a steady income with not as great as a risk, you could do what's called a covered call. This is especially good if the stock pays a dividend.
Covered Call:
Buy 100 shares of a stock
Sell one call on the same stock.
For example, real world example I did a few weeks ago....
1. Buy 100 shares @ $40.60
2. Sell one $43 call at $3.26
Meaning... someone paid me $326 for the right to buy my $40.60 at $43.00
So, the price stays where it's at, I keep the $326, and I also keep the stock
If the prices goes up above $43, they exercise. Which means not only to I keep the $326, but I also get another $2.40 per share profit because they're paying me more than I paid for the stock.
The risk comes in if the price drops below $37.34 (40.60-3.26)
The trick is to sell calls that never get exercised. After they expire, you just sell another call etc.
On top of that, since you own the shares, you also earn the dividends while you wait to see if the shares get called away.
In the regulated stock markets, you have people called "market makers", who are there to provide liquidity.
Their job is to always be around to buy or sell.
So, if you have the bid and the ask on a stock, they will always buy at the bid and will always sell at the ask.
You're never going to make it with that attitude, OP.
Fuck i hate being stupid. This shit is confusing i guess il just stick to my meme coins.
you really are retarded, aren't you? stick with the coins. bett er suited for retards like u
No one loves you and i accept your apology
Trading meme coins is like trying to make money in an unregulated forex market. If you're not really on top of all this, you're going to be eaten alive.
Yea i know. Ive made a comfortable amount in crypto since i got in march last year. Just trying to find ways to diversify what ive already cashed out
You're an idiot. If you don't understand options you'll never truly understand how to make money in a market. You won't understand risk adjusted return, or anything about hedging downside.
Hence why i said il be sticking to meme coins. I might buy some property when prices go down in the next recession