posted
Okay I understand how options work, but dont know how to trade them. Lets say I want to find the option table for a certain stock like yahoo. Is the option table a live stream that constantly changes? When I want to buy an option, is it like a stock where I have to buy at the ask? I have a margin account in scottrade.
-------------------- Disclaimer: Not accountable for anything I say Posts: 6266 | Registered: Jun 2004
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Yes, you would buy at the ask. If you buy 1 option at 5.00 ask, you would pay 500.00 and have an option to buy or sell 100 shares of the underlying security, depending on if you bought a put or a call. That rarely happens though. Typically you'd sell the option as it approaches the strike price, again, depending on if it's a put or a call. Time is another concern. As the expiration date approaches, the value of your option will decrease because on the expiration date, they expire worthless and you lose everything.
Using Yahoo as an example, you could buy a January 20th call with a strike price of 27.50 for 75.00. If the stock soars upwards, your option price will do the same. If on the other hand the stock tanks, so will your option price, unless you decided to buy a put.
Tons of money can be made trading options but it tends to be an all or nothing gamble. In my experience with them I've had more expire worthless than the few I've made good money on.
Posts: 5729 | From: Wisconsin | Registered: Sep 2003
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quote:Originally posted by Upside: Yes, you would buy at the ask. If you buy 1 option at 5.00 ask, you would pay 500.00 and have an option to buy or sell 100 shares of the underlying security, depending on if you bought a put or a call. That rarely happens though. Typically you'd sell the option as it approaches the strike price, again, depending on if it's a put or a call. Time is another concern. As the expiration date approaches, the value of your option will decrease because on the expiration date, they expire worthless and you lose everything.
Using Yahoo as an example, you could buy a January 20th call with a strike price of 27.50 for 75.00. If the stock soars upwards, your option price will do the same. If on the other hand the stock tanks, so will your option price, unless you decided to buy a put.
Tons of money can be made trading options but it tends to be an all or nothing gamble. In my experience with them I've had more expire worthless than the few I've made good money on.
So to clarify...if you do a call and strike price is $15 and you are a month away from the expiration date and it flew to $25...your option would increase in price, and then you can sell the option?
What if the stock was at $20 and strike price was $15, but there is only a week left to expiration, would you not make any money?
-------------------- Disclaimer: Not accountable for anything I say Posts: 6266 | Registered: Jun 2004
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It's tricky. If you're a month away, the option price will rise but probably not as much as you'd like because there's ample time for the stock to go back down. The ideal timeframe would be somewhere around two weeks from expiration. Thats when you can see some wild fluctuations.
There's a couple of different strategies you could consider and buying time is one of them but you pay a premium simply because you have a long time for the stock to go in your anticipated direction. They also don't move as much simply because of the time factor. Another is trading ones that are only a few days to maybe a week away from expiration. Gotta be quick if you do it that way though.
Maybe Bob Frey will chime in here. If I remember right he loves playing options and I think he's more of a short term player. Or send him a p/m, I'm sure he'd be happy to help you. Good luck if you give it a shot.
Posts: 5729 | From: Wisconsin | Registered: Sep 2003
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At the bottom you will find what you are looking for. Then hit me up with your questions.
Options is WAY more then what is preached... There is a 80 % FAILURE rate with Stock Options, and no need for it IMO if you know charts and indicators ~
People who write the contracts usally come out ahead, especially the ones who know what they are doing. Like selling Calls when a stock is "peaked" and knowing that the Calls will expire worthless.
I play EXTREME tops and bottoms, real simple stuff, straight CALLS or PUTS.
However, if you did want a more "for sure" way to go (but also less profitable) do a basic Spread. You buy a Put and a CALL just "out of the money" this will give you a Delta neutral (you'll have to learn the "Greeks") meaning, you make money no matter what it does, unless it trades sideways!
Delta neutral is what MM's do.
Rule of thumbs......
Buy 3-6 month contracts and ALWAYS sell with one month to go. I love the "cubes" (QQQQ) or any of the top performers, right now China's HOT!
If the NAZ is uptrending (weekly chart, gallery page, stockcharts.com) then buy CALLS on strong stocks that have a trading pattern like the cubes (overlay price charts) or if downtreding buy PUTS.
Anyways just go through that material at that link, it's easy to understand and will answer alot of questions for you. Then start picking them, or piggyback my trades till you get the hang of it. Have a $41 Put on the cubes right now and the good old SPY is gonna get the next PUT!
Just ended a COP CALL and it was SWEET ~~~ Check out COP's chart pattern with the cubes (QQQQ)!
And don't let the 3-6 month contract scare you, buy one every month and the 5th month is your cash flow. And try to buy more then one contract at a time for commissions sake, but do what you can.
Extra money from Penny's this year are going to ramp up a very aggressive Option account for me (God willing), I'll tell you everything I know, nothing to loose ~
I can even turn you on to a "NICE" free Virtual trading platform, place your orders, see if they take and watch your bottom line.
BTW you can chart options too!
Once again, knowing the indicators will put you ahead of the market, and as the stock turns you'll make alot of money with even a small price movement of a couple bucks, really easy to double your money. You don't have to wait for the stock price to double to have 100% gains.
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