Options Trading question?

Question

Question Regarding Options Trading, using lowes for a example

Looking at purchasing Lowes call option with strike price at 25.00. for $1.55. Currently lowes stock is selling at 23.50. If i purchase 10 call options my cost is $1550.00, is this correct.

If so say that lowes stock jumps up to 24.00 sending the call option up to $1.95.(theoretically) Is there any way that I can cash out of the option and collect my projected profit, or am i locked into the option until it expires

Projected profit- 1000 x.40(change in option price)= $400 -commision charges.

As well to do the above trade do I need to own 1000 shares of lowes stock or can i just own the option on lowes stock.

Any help would be appreciated

Answer 1

Ok, so Lowes calls .... 25 strike .... for $1.55 ... so your looking at $155 / contract. if you did 10 it would be: $1,550 - correct (assumeing your not including commission etc)

IF your buying a call, you are bullish (you want it to skyrocket) or your hedgeing ...

A call says "I can buy at this price" - in this case it would be I can buy at $25 .... so you would be looking for the stock price to go to $50 ..... if it drops, you lose the premium you paid at expiration.

The majority of the time (80-90%), options are not held to expiration, but they are sold (traded away) for the profit if in the money.

You can sell the option at any time .... if the stock went to $50/share .... you can sell all your contracts .... and take all your profit - it makes no difference when expiration is.

If you buy just a straigh call, you don't need to own the stock .... you have the right to buy it ....

Good strategy .... but options can be risky of course. Make sure it is something you really want to do ....

Hope this helps you ...

P.S. You will more than likely have to get approval for options trading from your broker ..... and they have different levels for different options strats. It depends on experience and net worth etc as far was what you may get approved for. ...

If you have other questions, please feel free to e-mail me!

Answer 2

1

Answer 3

Yes, you are correct on the math regarding the Call Contracts for Lowes. You are also correct in that you can sell/trade the contract prior to expiration. Its call Options Trading, and as you can see, it can be quite lucrative. Once you purchase a contact, be it a call or a put, you are not obligated to hold it until it expires. You can trade it whenever you want.
Now, when Options Trading you NEVER own the stock, as you would have then coughed up the doe to buy those stocks and thereby calling in your contract. This means you now have a Long Position, and you are no longer in the Options World anymore. So what you are actually trading is your contract to purchase the shares you have the call on, that's it. You do not own any shares, in any way, shape or form. You simply own a contract that entitles you to purchase those shares at that assigned price. Hope this helps. Options trading is a pretty hot market. Sounds like you have a good grasp on it too.

Answer 4

well to answer your questions to the best of my ability...

1. You can buy the option itself. You dont need to own the stock.

2. You should be able to sell the option or exercise it anytime before the expiry date..

However, your THEORETICAL price is nonsence.

if a stock price is 23.50 and the strike price is 25.

If the option is at 1.55, it is NOT going to jump to 1.95 if the stock moves to 24.00

giving you a profit of .40/155 or 26%!!! Just won't happen..Not Theoretically or even hypothically, or even in Peter Pan fairy tale land. The stock price is still $1 below
the strike price.

Answer 5

One can both own a stock and trade call options. it's called "selling a covered call". it's mainly a hedge against a stock going down, a bet that the stock will stagnate until the call expires or timing bet on a volatile stock.

But it's more akin to a side bet on a stock that you're long term bullish on.

Answer 6

You can't succed in binary trading without a strategy, a good method to follow and some kind of software support. They program I use is called "Autobinary signals". It helps finding loopholes for guaranteed returns. It's very easy to use and I'm earning good money. You find all the details on this site: http://tradingsignal.toptips.org

Answer 7

2

Answer 8

the best trading software http://tradingsolution.info
i have attended a lot of seminars, read counless books on forex trading and it all cost me thousands of dollars. the worst thing was i blew up my first account. after that i opened another account and the same thing happened again. i started to wonder why i couldn,t make any money in forex trading. at first i thought i knew everything about trading. finally i found that the main problem i have was i did not have the right mental in trading. as we know that psychology has great impact on our trading result. apart from psychology issue, there is another problem that we have to address. they are money management, market analysis, and entry/exit rules. to me money management is important in trading. i opened another account and start to trade profitably after i learnt from my past mistake. i don't trade emotionally anymore.
if you are serious about trading you need to address your weakness and try to fix it. no forex guru can make you Professional trader unless you want to learn from your mistake.

Answer 9

You want to trade two high end guns for what really is not much more than an AR-15 ? Okay, you can feed it crappy steel cased ammo.

Answer 10

Unless your are expert in option trading, don't trade options.