That sounds great, but watch how buying a call option on YHOO would have given you a 955% return (instead of the 75% return from buying the stock!
Put options - Investopedia
However, put options have a limited lifespan. If the underlying stock price does not move below the strike price before the option expiration date, the put option will expire worthless.
Wading Through Wader Options - A Fishing Waders Buyer's Guide
This options trading strategies course studies the need for Option adjustments, and why adjustments are as critical to the success of your position as good entry or analysis. We consider all the four basic strategies - the Long Call, Short Call, Long Put, and the Short Put and look at various adjustments to these positions if they get into trouble. Every investor has a "pain point" - this is the point at which they adjust their position. Applying a rigorous approach to this pain point enables investors to control risk while maximizing the opportunity to profit. The course also discusses various details like early adjustments, over-adjusting and adjusting profitable trades as well as the importance of the investor's outlook for the stock when considering adjustments.
For ease of understanding, the calculations depicted in the above examples did not take into account commission charges as they are relatively small amounts (typically around $65 to $75) and varies across option brokerages.
Different people view it in different manner. Generalizing it may not be a good idea. Many people interpret open interest as described below:
If you are investing the Peter Lynch style, trying to predict the next multi-bagger, then you would want to find out more about LEAPSÂ® and why I consider them to be a great option for investing in the next MicrosoftÂ®.. [Read on.]
Each trade comprises two transactions, opening transaction and closing transaction. When you go long BUY call (or put) option as opening transaction it is called as &ldquo Buy to open&rdquo . You will close this position by taking opposite position . by selling the same amount of call (or put) option. Closing transaction in this case would be called as &ldquo Sell to close&rdquo .
The Options market has a number of terms that we need to be aware of. Starting with terminology differences like "Long" and "Short", we look at all the details that go into the Options market. We explain the important processes like Exercise and Assignment, as well as things like Expiry series, Bid-Ask spreads, Brokerage and transaction costs and various other details. What is Open Interest and why is it important, and what is the role of a Market Maker. We study the different Order types and which ones are important for the average investor, and which ones make sense in different situations. We also discuss Regulation T Margin as it applies to Options as well as Portfolio margin.
Say you were proven right and the price of XYZ stock crashes to $85 at option expiration date. With underlying stock price now at $85, your put option will now be in-the-money with an intrinsic value of $6555 and you can sell it for that much. Since you had paid $755 to purchase the put option, your net profit for the entire trade is therefore $855.
Day trading options can be a successful, profitable strategy but there are a couple of things you need to know before you use start using options for day trading.. [Read on.]