I want to learn about buying stock options. Is my idea (below) correct on how it works?

March 20, 2011 by  
Filed under Option Trading

I have a stock trading account and I have been playing with the “d? To the negotiation?” N “for populations of about 2 for years now. I have taught? Ado certain strategies I use and I’m very c? So most? To increase my selections? soon after? s to buy an action? n. Now I’m interested in stock options. Here? est? my understanding. . . If I find a population? N currently trading at $ 30 and I think the population? N increase? 10% in the future pr? maximum, I can buy, say 100 shares at $ 30 ($ 3,000) and the expectation of an increase of 10%, or I can buy an extraordinary choice for purchase (100 shares) in a fraction? n the $ 30 – maybe $ 1 per share? n = $ 100. This extraordinary choice gives me the right to buy 100 shares at 30 d? Dollars, even if / when the price increased by 10% to $ 33. At that time, then you can buy 100 shares at $ 30 ($ 3,000) and immediately sell 100 shares at $ 33 ($ 3,300). I lose the $ 100 for the option “to buy, but I make a difference of $ 300 with a net of $ 200. I stand to lose the original $ 100 if the price does not rise, but do not have to invest a total of $ 3,000 to which is a sure profit maker.? Is this the idea b? Music of stock options?

Comments

5 Responses to “I want to learn about buying stock options. Is my idea (below) correct on how it works?”

  1. Patricia C on March 20th, 2011 9:26 am

    I don’t know a thing about stock options except that my husband lost close to $20,000 mucking around in them a few years ago.

  2. Robert M on March 20th, 2011 10:06 am

    Yes I think you get the jist of call options.

  3. rr12d on March 20th, 2011 10:20 am

    You must be approved for options trading in most? A brokerage in l? Nea.Estoy familiar with E * Trade and write calls to be approved to Level 1 (approval? No instant? Line on request) and to buy calls or puts you be approved for level 2, which is the level 4.Type a call when you own 100 shares or an accident? ny write the extraordinary choice of purchase for a price Spec exercise? traffic and get the price for this extraordinary choice of 100 times (or however many to write contracts, contract = 100 shares) So if someone bought it? this extraordinary choice real decides to exercise before expiration est? No forced to sell their shares? l ejercicio.Eso the price is all you can do with level 1 comercio.Para options to buy a call or to put a single exercise price (per 100), must be approved for the level of trade in two opciones.E * Trade required to read the character? appliances and risks of standardized options before applying for options trading.

  4. Lake Lover on March 20th, 2011 10:27 am

    You are partly right, partly wrong. In your example, if you buy a call option and the stock goes up above the strike price, you do not have to execute the option and buy the stock in order to make a profit. You can simply sell the call option (close the position), which should increase in value if the stock goes up. The problem is that a person buying a call pays a premium and that premium tends to erode or loose a little value each day as it gets closer to the expiration date of the option.

    A much safer way to ‘play calls’ is to sell the calls against stocks which you already own. You can generally sell one call against every 100 shares of stock that you own. You receive the premium and if the stock trades above the strike price the stock is sold for you and you get the amount of the strike, minus of course the commission to sell.

    I have read that 90% of gamblers who buy naked call options lose money on the options. I was one of those and I lost $90,000 before I stopped gambling. Good luck — you will need it!

  5. zman492 on March 20th, 2011 11:23 am

    I strongly encourage you to learn about them before trading them. I suggest you start at the CBOE Learning Center

    http://www. cboe. com/LearnCenter/default. aspx

    and the OIC Options Education site at

    http://www. optionseducation. org/

    There a a lot of good, accurate, free, well written education material at both sites.

    Then, if you are still interested in trading options, I suggest you read at least one good book about options.

    Your idea is one possible way to use options. There are hundreds of other ways, including a lot that most people would consider much safer than what you suggested.

    ——————

    Successful option traders almost always trade volatility more than stock direction. Until you understand what that means, and why it is true, you are likely to lose money if you try trading options.

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