Buying stocks vs Buying options

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[supersonic6]

What software is this? I would love to visually see the risks that I'm taking.

[34rocco]

@supersonic6 its TOS or ThinkOrSwim

[vegaspilot03]

So if i buy an options contract, it goes up in price and gets "in the money" then the further up it goes, the money money i make until expiration date? or would my stock broker immediately exercise the option and sell the shares as soon as it gets IN the $, can you further explain please?

[34rocco]

@vegaspilot03 The broker will exercise the option at expiration if it's ITM, if not it will expire worthless. You can sell the option at any time before expiration, or you can exercise the option if it's ITM before expiration also.

[34rocco]

@vegaspilot03 get more info by going to a3holdings com click on education and goto ITM.

[Mahooorz]

so when i excercise the option i would be payin the cost of $500 plus the excersice price of $7,700 wich adds up to $8,200 so i i think the i think when calclated th ROI we should put the 8,200 not 500 ... any comments???

[34rocco]

@Mahooorz Remember if you exercise the option you are increasing your total risk. That being said, I like to limit my risk at all times.

[wendy2212]

@Mahooorz The thing is that you don't need to pay the 7700$. The option is automatically exercised and the shares are sold immediately by your broker. You can just hold your option into expiration and net the profit. You do not need 7700$ in your account. If the option is out of the money, it will simply expire and you lose your 500$

[34rocco]

@Mahooorz Yes! Thats right if you exercise the option the cost of the option + the cost of exercising the option = the total cost of the trade, witch changes the ROI. But this is a basic video on just trading options. Remember you can always sell the option (or exercise the option if its In The Money) before the expiration date.

[gutrp]

thanks man! well explained video..please upload more educational videos..

i also how u zoomed in to explain everything.

5/5

i subscribed to ur channel