I need to use a call option on a stock but don't know how?

Question

I was thinking of buying a stock online. The stock currently stands at $50 per share. But it might rise in the after hours. I do not want to pay more than $52 per share in case the stock price rises. So if I specify my call option online at $52, does that mean that I would have to pay $52 per share even if the stock price stands at $51 once the market opens again? Or does it automatically get filled at the lower price and the $52 is just the maximum price?
Also, I want to protect myself in case that stock drops. So that means I have to put a stop loss? Or is it a put option? I want to put it at $49 since it is a very volatile stock.

Answer 1

If a stock is trading under $52 per share, and you do not want to pay more than $52 per share for it, simply buy the stock with a limit order. You will not be able to buy a call in the after hours.

Listed options have set strike prices, almost always in $5.00 increments for stocks over $40. You do not specify any value you want for the strike price, you choose an existing strike price. For a stock trading at $50 the closest you could come to $52.00 would probably be $50 or $55.

Owning a call option gives you a right, not an obligation, to exercise the option. You would never have to exercise the option no matter what the stock price is.

A stop loss order will not protect you if the stock gaps down. A put option will. However, if you place a stop loss oder and it is never filled it will not cost you anything at most brokerages. However, if you buy a put option and never exercise you will still have to pay the premium for the put option.

I strongly recommend you learn more about options before you consider trading them. There is a good free introduction to them at

http://www.cboe.com/LearnCenter/default.aspx

which has free tutorials and classes.

Answer 2

Well, your question does not really make sense. When you buy a stock and do not want to pay above a certain price, you enter an order with a limit. So in your case, you would put in an order to buy the stock with a limit of $52. If the stock is priced less than that at the time you enter the order, you'll get it at the lower price, if the stock opens above $52 and does not drop to $52 during the day, your order will not be filled.

You have to specify whether the order is "good-for-the-day" or "good-til-cancelled". If its the former, then when the day is over, if the order hasn't filled, it is closed. For "good-til-cancelled" orders, they usually stay open for 60 days.

Now if you expect the stock to go up, you can just hold the stock or sell a covered call option (a covered call mean that you own the stock and will sell it at the call option strike price).

If you are worried about the stock going down, you can buy a put option, which is the right to sell the stock at a certain price (called the strike price) at a certain time (close of the 3rd Friday of the month, for october, it would be the 19th). If you were to buy 200 shares then you would need to buy 2 put contracts since each put contract is 100 shares. You can also put in a stop loss order instead of buying a put option and the stock would sell if the price drops to that level.

I would recommend that you do a little more studying and research to get a clear understanding of what you'd like to do. But it is harder than most people think to write a clear concise question.

Answer 3

a decision determination is whilst the value of the inventory is contained in the money or on the money for a strengthen in value or going long. positioned determination is whilst the inventory value is decreased or shifting all the way down to short the underlined inventory