posted
Before I pull the trigger, I want to make sure I have this stuff figured out right.
If I buy one July 07 $10 contract for $.05 and later see that, after big news, the July 07 $10 contract price is $.50, can I simply sell the contract at $.50 and take the profit(10 times)? Or do I have to excercise the contract, buy the 100 shares at the strike price of $10, and then sell them again to realize a profit? In other words, I want to know if the contract can be traded like a stock, only with limited time to do it.
What I'm looking at is risking a certain amount of money, but not have enough money to actually buy the 100 shares. Hopefully my question makes sense.
-------------------- Good judgment comes from experience. Unfortunately, experience usually comes from bad judgment. Posts: 205 | Registered: Mar 2006
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posted
Has anyone used Scottrade to buy options? Their terminology, buy to open/buy to close, etc. is confusing me, even with the explanation.
-------------------- Good judgment comes from experience. Unfortunately, experience usually comes from bad judgment. Posts: 205 | Registered: Mar 2006
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posted
My opinion is that you need to do a bit more research. you can buy in the money, out of the money, straddles, LEAPS, and on and on and on while you're risking losing your entire investment. Take some time to read up on them, you can make a killing but can also be killed real easy.
Posts: 5729 | From: Wisconsin | Registered: Sep 2003
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posted
Upside, I hear ya. That's why I posted here first. Basically all I'm trying to do for now is buy plain calls and puts, without intention of actually owning the shares. I wanted to just trade the contracts themselves.
-------------------- Good judgment comes from experience. Unfortunately, experience usually comes from bad judgment. Posts: 205 | Registered: Mar 2006
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posted
Anyway, unless you're actually writing options (which I'm sure you're not) your only concern is "buy to open" and "sell to close". Buy to open is simply telling your broker you wan't to buy an option, either a call or a put, on a specific security. Sell to close is telling them that you wan't to sell that position.
Posts: 5729 | From: Wisconsin | Registered: Sep 2003
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posted
Thanks for the help Upside. Looks like I understood things right, I just wasn't 100% sure.
-------------------- Good judgment comes from experience. Unfortunately, experience usually comes from bad judgment. Posts: 205 | Registered: Mar 2006
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posted
Ok, so here's another one. Say you can't sell your 10 contracts before expiration because the strike price is too far out-of-money or what have you. It expires worthless and you simply lose the premium you paid for the contracts, correct? You're not stuck with the 1000 shares.
Posts: 205 | Registered: Mar 2006
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quote:Originally posted by cspaude: Ok, so here's another one. Say you can't sell your 10 contracts before expiration because the strike price is too far out-of-money or what have you. It expires worthless and you simply lose the premium you paid for the contracts, correct? You're not stuck with the 1000 shares.
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