The Basics of Call Options

[byronjrperez]

market observer i was wondering if you have more options explanations... other strategies with calls applications....

[byronjrperez]

hell yea market observer.... rocks

[dqk420]

In his example anything over $55.50 per share on the day the option expires would be profit (not factoring transaction fees) Of course he would have to exercise the option and buy 100 shares for $5,500 and then re-sell the shares for $5,550 or more (preferably more).

[dqk420]

I wouldn't buy an option with a strike price of $55 while the price of the stock was currently $50. I had to watch it a couple of times. In his example that option would have an asking price around $0.05 not $.50 and would probably have a listed bid price of N/A his example is one of the riskiest maneuvers in options trading. At $0.50 per share the strike price should be around $49.50.

[Omega08082]

Why if I expected it to go to $55 I didn't just buy at $51? Then when it was at 57 I would've made a much bigger profit and I would've lowered my risk of losing my money if it expired at or below your $55 call?

[mdr226]

@Omega08082 because your contract price would be more expensive at 51 compared to 55

[Omega08082]

@mdr226 Oh ok, and also my profit would be bigger at $55 than at $51?

[Debatewithme]

But who is buying the option when you sell it if it expires?

[tubrojet]

thanks marketobserver

[jaylaine74]

nice video's

[walktheworld]

Mr. Perry, Thanks for the vid. It taught me how a modest gain in the underlying can mean major profits. One quibble - Tripling your money is a 200% gain, not 300%, just as a double is a 100% gain, not 200%.

[MsiPodTouchX]

Does anyone know what TTY is?

[juni10134]

rally= the price rises

[khanpreston1]

what is rally?

[adulamunda]

Maybe someone can help me. If someone believed the stock would rally to $57, why would he pay $150 for the right to purchase the stock at $55 when he could profit more if purchased now, at $50?

[NewBaldwin]

because a single options contract represents 100 shears (most anyway).

so you're buying 100 shears for $150 vs 1 shear for $50.

i hope i understood your question

[CyboreoTwinkie]

@adulamunda

From what I understand, there is two situations. First, the buyers might not have the money to purchase all the share for $50 now, but in the future, he/she might have the money to get the share for $55. Second, when the stocks do get to $57, the buyer might negotiate the seller to get the difference while the seller keeps the stock. The seller then can sell the stocks for a profit.

But that is what I know :)

[bigdogITbiker]

@adulamunda if the stock price is less than $55 by expiration, you are out only the MAXIMUM $150 in this ENTIRE deal. if you go buy the stock outright now, at $50, and the stock drop just 2 bucks in price, you our out a total of $200! from just a $2 drop in stock price, if you buy the stock outright. hope this helps.

[sotatorfak]

excellent video.

I really enjoyed it.

Could you please upload more videos related with options?

[cbal11ler]

what if u want to sell you option before the expiration can u? does anyone know

[passthetestinc]

absolutely--options trade every day the markets are open. Even if it's a "European-style" option that can be EXERCISED on expiration only, that option can be traded/sold/closed whenever the markets are open. If you bought it, you can sell it. If you wrote it, you can buy-to-close.

[wojtek0000]

Drags a 4 min topic to 7 min. noob.

[gutrp]

its easier if u give a real example

[xFatiguedx]

you can lose all your money but do you have to also pay for your lose? let's say I use 2k and make what would be a -500% loss do I owe an extra 8k or can I only lose what I put in and make a profit?

[njacob2122]

you only lose what you pay. think of it this way - option = choice to buy shares at strike price, not obligation.

If share price does not reach $55 strike price by expiration, the option value is lost and you only lose what you paid to purchase the options.

Lets say the option expires Dec-09. If the share price exceeds the strike price (stock goes up to $57) by Jul-09, and then ends at $50 in Dec-09, it is deemed worthless IF you didn't exercise your option in Jul-09.

[passthetestinc]

If you buy an option, you pay for it in full. If you lose, you lose what you paid for it, period. If you sell an uncovered option--whole different ballgame.

[dreamcinderalla]

Hi, Thanks for the wonderful explanation. It cleared my doubts about options. But. one thing I want to ask you. If the price of the stock moves by $2, then our call is in profit. We can make profit by buying the stock at the strike price and selling them at the market price. But, we can also make profit by selling the call itself for profit. Or, can we do both and profit from both.

How is it exactly, pls explain.

Thank you once again for your clear explanation.

[passthetestinc]

You either sell the call for a profit or go through the hassle of exercising your right to buy the stock. Most people just take their profit by selling the option.

[benjamin975]

Excuse me for being a retard, but if you spend $150.00 on a contract for for 100 shares and .50 for the option a share isn't it a break even deal at a 57.00 sell on a 55.00 strike price?

Stupid question I know but really interested in how it works

[incredibleschalk]

So helpful. So so so so helpful

[geromiah69]

Thank you, I like your lecture style and I learned a lot

[Dividend]

Great video, it cleared up some questions for me.

[SnakeEyes1337]

great vid, thanks so much. keep it up

[rob0205]

Thanks, you gave a good simple example, maybe just a bit too much of extra talking at the end - but thanks anyway :)

[wallybanners]

Hey Nick make a series on options and hell man Ill buy it on the spot!

[Hallaran]

Fantastic! Thanks :-)

[MakinMula2]

Thanks, you did a great job simplifying as well as explaining.

[wilreynolds]

Good video! Thanks!

[figifigi23]

Very nice... :)

[incapower]

I really like u explain options trading. Thank you so much! and keep up the great work

[fc007]

If you are the call buyer, you would want to strike at above the break-even point (55+0.50) it's not enough just to be in-the-money; the market value has to cover the strike price and the premium, otherwise let the contract expire.

[Rosatii]

Students of the trade should just stick to STC, but they do a good job here as well.

{thumbs up}

[Hotmonkeylovin]

Understood (learn walk before you crawl approach). Thanks for the thumbs up.

[maxgraff]

good one thanks