How is this true roughly option and shares? A trader might buy the preference instead of shares...?
...A trader might buy the option instead of shares, because for equal amount of money, he can obtain a larger number of option than shares.If the stock rises, he will thus realize a larger gain than if he had purchased shares.An example would be honest.
Answers: Here is an example that demonstrates how it is true.
Assume you are bullish on GE and expect the stock to go up from its current effectiveness of $34.59 per share to at least $37.00 per share by the close on 2/15/08. You own $7,000 you are willing to risk on that expectation.
If you bought the stock you could obtain 200 share for $6,918. ($34.59 x 200)
The call leeway with a 2/15/08 expiration date can be purchased for $0.87 per share. That would allow you to buy option on 8,000 shares (80 contracts at 100 shares per contract) for $6,960 ($0.87 x 8000).
If you are correct and GE closes at $37.00 per share on 2/15/08 the call option would be worth $2.00 per share, or $16,000 ($2.00 x 8000). If you had used one and the same money to buy 200 shares those 200 shares would be worth $7,400 ($37 x x 200).
Thus your profit would be
$7,400 - $6,918 = $482 if you had bought 200 shares.
$16,000 - $6,960 = $9,040 if you have bought options on 8,000 shares.
Of course, leverage is a two road street. If the stock did not go up to at lowest possible $35.00 per share you would lose your entire $6,960 investment if you bought the options instead of the stock. For the stock purchase to show a profit on 2/15/08 the price of the stock simply have to be greater than $34.59 per share, but for the options to show a profit the stock price have to be greater than $35.87 per share.
Options can expire worthless. Not for investors to buy and hold. Very risky proposition. I "play" with 10% of my total portfolio. An example.HOV be up 23% today, options that I hold be up 177%...click quotes below...
http://finance.yahoo.com/q?s=hov
http://finance.yahoo.com/q?s=HOVBU.X
1 option contract is leveraging 100 shares of stocks.
Absolutely true. Call option allow you to lever up. You need to spread you risk though, since option can expire worthless. There are fancy ways to buy and sell option that limit your upside and downside, but tolerate you 'play it safe.'
Options are financial instruments that convey the right, but not the necessity, to engage within a future transaction on some underlying shelter. For example, buying a call way out provides the right to buy a specified quantity of a protection at a set strike price at some time on or before expiration, while buying a put picking provides the right to sell.
A trader who believes that a stock's price will increase might buy the right to purchase the stock (a telephone option) rather than simply buy the stock. He would have no requisite to buy the stock, only the right to do so until the expiration date. If the stock price increases over the exercise price by more than the premium remunerated, he will profit. If the stock price decreases, he will permit the call contract expire worthless, and solely lose the amount of the premium. A trader might buy the option instead of shares, because for alike amount of money, he can obtain a larger number of option than shares. If the stock rises, he will thus realize a larger gain than if he had purchased shares.
A trader who believes that a stock price will shrinking, can short sell the stock or instead provide a call. Both diplomacy are generally considered improper for small investors. The trader selling a call have an obligation to go the stock to the call buyer at the buyer's picking. If the stock price decreases, the short phone up position will make a profit within the amount of the premium. If the stock price increases over the exercise price by more than the amount of the premium, the short will lose money, with the potential loss unlimited.
I can contribute you thousands of examples where that sort of thinking designed losing thousands of dollars. Options were invented to create it easier for wall street to steal your money...its that simple.
The list of sucessful option traders is a short one indeed. You have to be at the top of the pile to make consistent money surrounded by options and more importantly, you hold to be very conservative to do so. The best ones that trade name consistent money trading options certainly lose money on the options side of the trade. Its call a call writing strategy but you own to lose money on the options side to label a net gain on the overall trade. And more importantly, you enjoy to be 101% correct, 100% of the time to make this work. This requires oodles years of experience, a huge amount of capital and huge ball. If you have adjectives 3 you can be a star.if you lack any one of those you will lose everything.
Here is how this works. Each leeway is a contract to either buy (call) or vend (put) a stock at a certain price. Each alternative contract lets you buy/sell 100 shares of stock. So ten option is the ability to buy/sell 1000 shares at a abiding price. for an example.
You think company XYZ's stock will increase within the short run. You could by 100 call option to buy at a strike price (price at which the option is redeemable) difficult than yahoos price. As XYZ's shares rise the value of the phone call options will rise. Using this stratagy you can potential control 10,000 shares of XYZ stock at a price track below what it would cost to buy 10,000 shares of XYZ on the exchange. As the price of XYZ stock rose your options will be within the money(strike price below open open market price) thus gaining more importance. Using options your gain will be magnified by almost 100% so if used correctly you can really bamk it... hope this helps
Many profession traders use option almost exclusively.
Yes there is leverage.
Yes you can get hold of rich quicker but it is not get rich early.
As you study how they are used on a professional level you will find it is certainly more conservative than buying stocks outright.
go to http://www.thinkorswim.com/tos/client/in...
and
http://www.woodiescciclub.com/start.htm
lots of free info on option.
How much can I buy a small piece of property to invest surrounded by?
If I wanted to invest within a pretty small piece of property, what could the price vary from?Also if I looked-for to buy a house to invest in, how much would a VERY SMALL foreclosure house varify from?
One final question, if my parents purchase the property or house for me very soon (I'm 17), when I'm 18 can I become in control of that property or house?
Answers: 1 and 2) Realty trac will enjoy the value of a severely small foreclosure house.
3) Your parents can buy it for you now and Quit Claim it to you immediately.
I agree, you can own house and or land at 17, as to price, investment come to rest would have to be a buildable lot, not knowing where on earth you are, I would say conservatively something like $50,000-$100,000
I just bought some within MA for $60,000, but rural area.
May be You ca try, click:
http://buy-new-apartement.blogspot.com/
http://buy-new-home.blogspot.com/
What are some stocks that submit solid dividends?
With the market anyone extremely volatile right now I'm looking to shift some money surrounded by to some stocks that offer solid dividends.I'm not looking for a breakneck buck but rather long permanent status stability.Answers: I like DRE,
and some of the elder established consumer staples,
JNJ
WR
PEP
MO
XOM
In the long run, a company that makes money and pays a ample RISING dividend has outpaced the flea market as a whole. if you re-invest adjectives dividends.
don't fall surrounded by the growth trap, buy buy buy...
Keep in mind companies can lower dividends at any time.
my guy say to leave it adjectives alone right now if you're looking long-term.
trying to "time" the marketplace almost always looses you money.
I mull over for most individuals it is better to stick with ETFs that concentrate on dividends... similar to DVY or PID.
Note that you're going to have sturdy overlap with the S&P 500...
First right immediately with low prices across the board yield on stocks are much higher after the yields on any t-bill. Here are you 5 best bets:
Co. Tic Price give up
1. Blackrock (MYJ) $13.52 5%
2. Ban. Am. (BAC) $40.57 7.1%
3. Citi group (C) $26.36 5.2%
4. ING group (ING) $32.06 5.1%
5. Barclays (BCS) $37.72 8.6%
Obviously most companies are financial but those are all stocks near a solid dividend. I like Citi and Bank of America to see a solid spring back in the subsequent 12-18 months. Barclays gives you the international exposure but scrutinize out for the subprime mess in england (its not freshly in the U.S). ING give a little tech exposure and have a solid low expense business model. Take your pick but if you were my client I would recommend BAC and C over the other three.