I'm want to buy call options, but I have to fill out all this stuff with a broker, and then they said I have to have 100 shares of the stock if I'm going to buy the option.. anyone know how I can just buy the call option w/o having to have 100 shares in my portfolio?
2006-10-12 08:32:05 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
I want to buy an uncovered call. Is this prohibited by brokers b/c of the downside? I know the risks, but I just want to buy the call uncovered. Thanks for any additional help.
2006-10-12 09:47:00 · update #1
That's a bunch of bull. You need to ditch those guys. You need someone who specializes in derivatives.
Whether you are trading stocks, options, commodities, futures, or all of these, TerraNovaOnline is the only broker I know of where you can trade everything, real time, online, direct access. A lot of online brokerages claim to give you direct access, but if they take more than a second to execute your trade, it ain’t direct.
Find the articles online that compare brokerages or charting software or trading platforms, or in the trade magazines, that have evaluated and compared online brokerages. I found a good one online in Barron's.
This is worth putting a little time and effort into, because it's a pain to switch, so once you choose, you're kinda stuck with it.
Townsend Electronics, the Parent company of TerraNova, are the people that digitized and electronified the Nasdaq. They are technological industry leaders and have a powerful and well built trading system.
I use RealTick at TerraNovaOnline, but it costs $275/mo. I think the Investor package is free to use, and just uses one screen.
TerraNova is the home of the Day Trader, so they think nothing of you making several hundred trades a day. You don't have to do that, but it's okay here if you do.
2006-10-12 08:42:00 · answer #1 · answered by dredude52 6 · 1⤊ 0⤋
Your broker evidently has only cleared your account for covered calls... that's why he wants those 100 shares of the stock in your account. What many people do not realize is that a brokerage must approve you for options trading... you'll have to submit an application and you'll have to be approved before you can start buying and selling calls and puts. Realize that the industry requires this... too many people think it's a get rich quick investment strategy... and more people lose money on options than those who make money (NOT my opinion... it's substantiated by studies). If you want to buy call options, you can certainly find a broker do do that for you... I suggest an online brokerage company... they are known for NOT giving advice, so you'll be on your own should your options go sour. There's a slogan in the brokerage business about options that you may have heard: The pigs get fat, and the hogs get slaughtered. My friend, I was a pig for a while... then I became a hog and was burned big time. One sour options deal can ruin you... so be cautious and don't take on any more risk than you have to. Good luck in trading options... best advice: take it slow, and don't be like I was. I made a killing early... and then thought it was easy... and that's when I was burned.
2006-10-12 22:15:16 · answer #2 · answered by Mike S 7 · 0⤊ 0⤋
I assume you know enough about how options work to understand your brokerage's requirement about holding the underlying stock before engaging in certain options transactions, particularly writing call options. If you can't see the logic there, you don't know enough to trade. Be very afraid.
You may have to open a different account with a different brokerage. Anywhere you go, you will have to fill out a special form, basically saying that you aren't stupid, and if you are stupid, it's not the brokerage's responsibility.
Check out online brokerages. I believe Scottrade and Ameritrade do not have this requirement, at least on buying options contracts. Writing, again particularly writing calls, is a different animal, since you can lose more than the amount of the original investment.
And, by the way, investing IRA or other tax deferred investments in options could get you in IRS trouble, too. Before doing anything, talk with your CPA. Not just a guy who does your taxes, but your real CPA. You don't accidentally want your IRA reclassified as taxable income, and have to pay 30-40% of your IRA to Uncle Sam in cash.
And, if you are successful, good luck! Hopefully, you don't need it.
2006-10-12 15:51:54 · answer #3 · answered by Polymath 5 · 0⤊ 0⤋
Typically, 1 options contract is 100 shares
2006-10-12 15:51:17 · answer #4 · answered by Milkman 1 · 0⤊ 0⤋
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2006-10-12 21:58:25 · answer #5 · answered by stock.geek 2 · 0⤊ 0⤋