CaptTurbo
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Betting, literally, on the hurricane season and Obama hammering these guys.
Betting, literally, on the hurricane season and Obama hammering these guys.
Well, I would not do that. When you take options you do realize that even if you hit you don't get any capital gains protection? Any gain will be fully taxed as ordinary income.
And you are right, it is a bet, a gamble. What is your strike price and what was the option cost?
Good luck. What you are betting on is that you are smarter than the market. Maybe you are and good luck, but options scare the crap out of me. BP already lost 2/3 of its market cap and all info is priced in IMO.
Investors make no sense. Claims for $ from BP continue to mount yet the stop has gone up 10 bucks on a new cap that 1) may not work and 2) evenif it does probably still doesnt save BP in the long run. Should have taken a longer put.
You cant just sell an out of the money option. You lose everything if you dont hit your strike correct? At least that is my understanding.
Does not look too promising. What you are betting on is that BP will lose 1/2 its value in the next 60 days.
You cant just sell an out of the money option. You lose everything if you dont hit your strike correct? At least that is my understanding.
And 5% is a pretty low threshold. Options can move 30% in a few hours.
I can only add the more I read about options the more they scare the daylights out of me.
I agree with Conrad that it's just tough to win when the rules you're playing by don't apply to others in the same stock.
Case in point yesterday Johnson and Johnson announced they were buying a bay area company called Micrus Endovascular which makes something connected to treatment of strokes. Apparently there had been rumors for weeks of a possible deal and people had been buying in hoping to reap the benefits and longer term stockholders thought their patience would finally pay off.
The final offer from J&J turned out to be a 6% bonus above the current price, not a typo, SIX percent! There are already 2 major lawsuits being filed, a shareholder investigation is attempting to be launched, and there's a call for a special shareholder meeting where they can hold a vote to oust the board of directors.
The obvious reason for suing is the BOD didn't get fair value for the company to its investors. I'm betting the people that bought the stock under 17 in May and sold it at 23 yesterday feel pretty good now and I'm betting a substantial amount that did that knew about the deal and knew what J&J's price ceiling was so they knew in advance what it would cost and what their profits would be.
I think even I could make money in the market if I always knew what was going to happen in advance.
The idea of making a killing off BP's demise sounds great, but it's just so risky.
Actually Russ to me and it's just my opinon, none of this is investment adivce, you seem to me to be a promising options trader.
Primarily because you're so cautious.
The idea is to identify a target, then devise a scenario of expected price movement, then develop an options strategy to exploit it and then manage the position.
Honestly it takes a lot of understanding of markets, options and risks and risk management but personality wise just for example IMO you'd make a perfect options trader, the ones who blow up are pure gamblers.
From what I've seen you study some biotechs and druggies and play the news/announcements just using stocks, if you knew what you were doing with complicated optons strategies you could capture more for yourself when you're right. It also implies you are specializing which is an excellent strategy, since you can only hold so much information in your brain at one time and the more you know about a sector the more chances are in your favor.
Think or Swim has a trading platform and a play account along with a ton of options training you can take, all free, anyone who wants to mess around with it should do so first with play money until they understand how to structure options plays to capture returns, then start with very tiny plays and kick the tires before you ever invest any real money.
I'd also say to keep it very small, like 5 percent of your total accounts, so that you can't blow your foot off while learning and then after a year or more you can raise that to like 10 percent if you're good and making money.
A lot of people play the biotechs and druggies this way because the news drives the stock so much, if you build the trade right a large swing up or down will make you money, the loser would be a dud and the stock more or less just sits there. Which incidentally after you learn options frontwards and backwards, you'd learn you can even play the dud if you want.
You don't have to get the direction right to make money, just the size of the move.
Options are great tools just like any other trading tool, if you use it for the right job your chances of success go up, you just need to understand them completely before you use them, they are lit sticks of dynamite in the wrong hands and if you get cute they'll lose the entire investment in a flash.
That's why most good traders rarely just bet purely directionally with them and if they do they realize they could lose it all and are ok with that risk.
OK so this is contrary to my understanding. Whats the purpose of in the money and out of the money than? Seems if you can profit regardless than what is the purpose of the strike price?
Well, that is exactly what an option is. A derivative contract to buy or sell a security at a given price on a given date.
The contract is it's own instrument and has value derived from the spot price, the strike price and the time until expiration - and that fluctuates reflecting the spot price moves, and is bought and sold separately from the underlying security. And it does not have to be in the money if there is sufficient time to expiration.
For example, your puts right now are virtually worthless due to the runuip today. But if some horrible news came out and BP dropped to $21 tomorrow, there would be a huge increase in price. However, if we were in October and it did not go below $21, the options will decline in value as a $20 put is worthless at expiration if the price is $21.
But seriously, your last 2 questions are fundamental basics of how options work. E*Trade would not let me trade options without signing a separate agreement that says I know what I'm doing and won't sue them.
You sure you still want to go down this road? I would seriously do a lot more research first.
Pretty much that.
It's like finding a bundle of high explosives and tinkering with them before going to high explosives school.
Hillary Clinton was quite successful in her first option trade! LOL!