Went for an options trading seminar by Optionetics and came away enlightened. Ok...i just came away with a little more knowledge about options, but it's enough to convince Mom that i can start trading. Well it is my money anyway, so it's nice that i can finally start trying to get returns off of it.
For those of you wondering what options are, its all about rights and obligations. Buying and option gives you the right, and selling gives you the obligation. Right and obligation to do what? To buy or sell a share at a specific price, at a specific time and date. At least that's the half that i remembered. Well anyway, it's simple. If you want to play it simple that is. The basics just consist of two type of options.
Call
This option is bought when you think that the share price is going up, or in market speak, when the stock price is bullish. This has the potential for unlimited profits, with limited risk. Cool huh?
Put
This is the reverse. Bought when a stock price goes down, or is bearish. Similarly, the lower the price goes, the more money you make. What did you just say? You heard me right, and i never fully understood this till today. For example, i buy an Enron put option at $85. Enron goes down to $2, so i sell my option, and make the difference. Confused? So am i, but as long as i make money, i don't quite care.
Finally, options orders are written this way.
IBM @ $43/Jan44c
Breakdown:
The first 3 letters on the left are the ticker symbol for the stock on the exchange. No points for guessing what this represents, yup, International Business Machines corp.
The @ symbol means simply that, at.
The $43 represents the price it is currently trading at, rounded to the nearest whole number. Rounded up or down? I have no idea, yet.
The Jan here stands for the expiration date of the option contract. All contracts have an expiration date, but more on that next time. Just know that they have it now.
The numbers 44 represents the strike price or the price you want to buy the stock at. Note that this is higher than the current trading price. This can only mean, yes, you guessed it, call option.
And finally, the c. It stands for call (options). A put option would look roughly the same, except that the c is replaced with a p for put.
Whew. Got that all in? Hope you did. Mom thinks that i should be trading as soon as poissble to make some extra pocket money. Then i won;t have to keep asking them for funding. Sure...i'd love that. When do we start?
For those of you wondering what options are, its all about rights and obligations. Buying and option gives you the right, and selling gives you the obligation. Right and obligation to do what? To buy or sell a share at a specific price, at a specific time and date. At least that's the half that i remembered. Well anyway, it's simple. If you want to play it simple that is. The basics just consist of two type of options.
Call
This option is bought when you think that the share price is going up, or in market speak, when the stock price is bullish. This has the potential for unlimited profits, with limited risk. Cool huh?
Put
This is the reverse. Bought when a stock price goes down, or is bearish. Similarly, the lower the price goes, the more money you make. What did you just say? You heard me right, and i never fully understood this till today. For example, i buy an Enron put option at $85. Enron goes down to $2, so i sell my option, and make the difference. Confused? So am i, but as long as i make money, i don't quite care.
Finally, options orders are written this way.
IBM @ $43/Jan44c
Breakdown:
The first 3 letters on the left are the ticker symbol for the stock on the exchange. No points for guessing what this represents, yup, International Business Machines corp.
The @ symbol means simply that, at.
The $43 represents the price it is currently trading at, rounded to the nearest whole number. Rounded up or down? I have no idea, yet.
The Jan here stands for the expiration date of the option contract. All contracts have an expiration date, but more on that next time. Just know that they have it now.
The numbers 44 represents the strike price or the price you want to buy the stock at. Note that this is higher than the current trading price. This can only mean, yes, you guessed it, call option.
And finally, the c. It stands for call (options). A put option would look roughly the same, except that the c is replaced with a p for put.
Whew. Got that all in? Hope you did. Mom thinks that i should be trading as soon as poissble to make some extra pocket money. Then i won;t have to keep asking them for funding. Sure...i'd love that. When do we start?
posted by Timothy at 11/21/2004 09:36:00 PM
<< Home