Posted on 02/02/2019 2:57:08 PM PST by Vision
Have a few questions and my head is spinning.
This is not to say that you should fear or disdain options. But you need to formulate a scenario where they would work to your advantage. To be clear a “scenario” as I am using the word means BOTH an entry and an exit strategy. Not just “hey I think this stock will go up from here” and then you go to sleep.
Here is a simple one I try to get some of my friends to use.
Suppose you buy a stock for $50 with the expectation that it will rise to $60. At $60 you are a seller and you’re not going to second guess or coulda shoulda yourself if it subsequently ramps to $75.
So you buy the stock for $50 and you go figure out what a $65 put would cost should the stock run to $60. It might cost $6. At stock $50 said put will cost $16. After you’re filled on the stock, place a GTC limit order to buy the 65 put for $6. Or 5.70.
If the stock ramps to 60, the put buy will fill, and now you have a position worth $65 at any price of the stock between zero and infinity. You paid $56 for it.
If you buy them, on average you come out with a loss - the odds favor the dealers.
If you sell them (covered), it’s all too easy to end up losing your own winning stocks or shelling out hard earned money for losers, but at least time is on your side. Uncovered, you’re headed for disaster.
I traded options until I lost all my money and went into debt.
Now I don’t trade options and I live in fear for my future.
Help me.
The guy who bought the option to put it to you at $100 won’t bother to do so with the price rising beyond $100.50. I don’t see any automatic execution happening. You pocket the $3, he has insurance against a reversal of the rising trend. He can unload the position on you for $100 if things do go south. Maybe I’m missing something.
What you said is something for me to ruminate on. I’ve never done stocks ever.
First of all, at $100.50, your $100 put is 50 cents out of the money, not in the money. Second of all, your basis would be $97, assuming it closes on expiration below $100 and you get assigned. If you were right, and the stock keeps going up, you keep your $300 and if the stock goes up to $150, well, at least you got to keep your $300.
Stay away from options if you’re not a math sharpie with a keen ability to manage risk. I’m none of these things yet I played options. I lost all my money and then some. Now at age 66 I live alone and have no close friends. And no family to help me. My future is so dark I need a headlamp to see. But I don’t own a headlamp. The best I can do is pray. Dear God. Help me. In Jesus name. Amen.
You could, but if it goes against you, your premium might not make up for the drop in price, if you were trying to sell, or the rise in price, if you were looking to buy.
Not for beginners. If you think you can get good advice on options from the posters on this website then you probably should not be investing in them.
buying and holding common stock - Drinking occaisionally
shorting common stock - dabbling in a little pot
trading options - mainlining HEROIN with tatooed people you don’t know in the scary, beat-up house in the bad section of town
Oh it’s ALL THE SAME, huh....?
NOT IN A MILLION YEARS.
I do and highly recommend it. I have insisted that my two boys learn to do the same and actually believe that it will be one of the best legacies I can leave them, as they can live and trade anywhere in the world, do it while holding down a full time job or trade full time.
Trading options is not gambling, rather it is trading probabilities. I highly recommend this website, www.tastytrade.com. It is the best and it is free. The motto of tastytrade is, Trade Often, Trade Small...and that little motto has changed my total outlook and improved my trading drastically. I would be very interested in joining a group that is seriously interested in trading. Trading is a lonely, but exciting business!
I absolutely love tastytrade...the best and free!
I don’t agree...it’s all about probabilities and you can choose your probability percentage. We, as retail traders, can be the “casino” (75% odds of the house winning). I personally like trading higher probabilities than that! I trade 85-88% probs and trade small and often.
PS; If your asking here, your gambling.
Leverage the house and the milk money then sell naked calls.
That’s, “investing” 101. /S
Beat me to it. So I'll go with my second choice.
Great way to keep fools from having too much money. You'd have better luck collecting a huge jackpot at an Indian casino.
Have you heard about bitcoins? I hear you can get rich fast. //sarcasm.
Have you heard about bitcoins? I hear you can get rich fast. //sarcasm.
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