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7
votes
3answers
1k views

Am I understanding buying options on stock correctly

I'm just wondering if I am understanding Stock options correctly. Basically if I am watching stock XYZ. It's currently at $10 per share which I believe is low and should raise to 20 within 1 month. ...
2
votes
1answer
45 views

Why don't options chain prices vary smoothly?

I'm looking at options chains for SPY for some particular expiry date. I'd expect that the last trade prices would vary smoothly with the strike price. But they don't; there are occasional puts that ...
2
votes
3answers
43 views

Why does a long/purchased call option have a long position in the option itself?

I am teaching myself some finance through a book. And I get confused by call/put options having short/long position in the options themselves or the underlying assets. For example, I understand the ...
1
vote
4answers
66 views

How do you go about exercising a put option with less than 100 shares?

I've 50 shares of a company and I'm wanting to leverage that with a put option (Buy to Open, with the expectation share price might drop). When the prices is right and I want to exercise the ...
1
vote
2answers
38 views

Do I have to pay MLP distribution if short via option?

If I sell a naked put on VLP, do I have to pay the partnership distribution if I'm holding the option when the distribution is declared?
-2
votes
1answer
60 views

A basic put option example

If I buy 100 shares of XYZ at 18$ and a put option with one month to go at a strike of 19$ for 45 cents, then my total expense is 1845$ . Now do I have a guaranteed profit of 1900 - 1845 = 55 $ in a ...
-1
votes
1answer
53 views

Difference between naked put, covered put, protective put

If I buy a long put without holding the underlying, does it amount to a naked put? If I hold the underlying and buy a put, is that a covered put? Also if I hold the underlying and sell a put, is that ...
7
votes
3answers
290 views

How does one typically exit (close out) a large, in-the-money long put option position?

I'm long some puts on a stock that has dropped a great deal. I've made $400,000 on an investment of $100,000. The question is, how do I exit? I can't really sell the puts because there isn't enough ...
5
votes
1answer
290 views

Options: Letting it expire or sell when profiting?

Do you let your options expire or would you sell it before you let it expire if you're profiting (meaning you're in the green - market is going towards the correct direction you anticipated). If you ...
0
votes
1answer
124 views

Put-Call parity - what is the difference between the two representations?

I have seen these two terms for put-call parity: S + P = C +Ke^(-rT) S + P = C + K/(1+r)^T Which one is the correct formula? When to use each of them? What is the diffrence?
3
votes
2answers
194 views

Can you write a put option without sufficient funds to meet the potential obligation?

When writing a put option does your account have to be funded so that if the buyer exercises the right to sell you can meet your obligation, or can you write the put option without the funds to meet ...
3
votes
3answers
251 views

Options strategy - When stocks go opposite of your purchase?

I'm a bit new to options and would like to ask for someone's strategy opinion. Lets say that you buy a call at an expiration date 2 months or so from now, and in a few days you see the stock go flat ...
2
votes
2answers
3k views

Difference between Black-Scholes, Binomial models and Market price in European index options?

Need some help! I have calculated the theoretical price of an index option using BS and Binomial models and are now comparing the three. While BS and Binomial have approximately the same value, ...
2
votes
1answer
92 views

Can you help identify/name this equity options strategy?

I am thinking of making such a trade: BUY PUT $590 MARCH WRITE PUT $600 APRIL I have done some reading and it looks like a diagonal put spread, but the diagonal put spread uses an ...
2
votes
2answers
4k views

Difference between European and American options

Appreciate some help with a problem i am facing OK, so first I found a put and call option with same strike price and maturity for both American-style and European-style options. I selected the ones ...
2
votes
3answers
314 views

Why do put option prices go higher when the underlying stock tanks (drops)?

Why do higher and lower strike prices for options all go up when a stock tanks? I am looking at Apple today (as an example), and with it down $8 today and currently at $376, why would the October ...
1
vote
3answers
81 views

When trading put options, is your total risk decreased if you are in a position to exercise the option?

I've been trying to work this out for a while: Say I own stock X right now trading at $250. If I were to buy a put option on stock X and I pay $5 for the option to sell at $250, If the stock ends ...
2
votes
2answers
775 views

Do stock option prices predicate the underlying stock's movement?

I am trying to understand if my thinking is correct or not. I am looking at a stock that is @ $10.00. When I look at the options on the stock $11, $12... calls are all down today and $11, $12... ...
5
votes
1answer
286 views

Options for the intelligent but inexperienced

(Related to "Options for Dummies" and "What are some good options strategies...") I've been an investor in stocks for the past 14 years and have the confidence that I know what I'm doing. (Not that I ...
5
votes
2answers
224 views

Can a put option and call option be exercised for the same stock with different strike prices?

Refer to http://finance.yahoo.com/q/os?s=PEI&m=2011-10-21 If I were to sell a call @ 15 and sell a put @ 13, come October 21, is it possible for BOTH of the options sold to be exercised?
3
votes
2answers
101 views

Can I profit from selling a PUT on BBY?

http://www.google.com/finance/option_chain?q=NYSE:BBY If I sell a Put at a $28 strike price, I'll earn $0.26/share (times 100 for one contract) = $26 today, correct? And as long as BBY doesn't drop ...
3
votes
1answer
181 views

Funneling money from a Traditional IRA to a Roth IRA using Options: Is my method possible and tax legal?

I'm new IRAs and I have both a traditional and Roth. My plan is to buy stocks in the IRA and buy protective puts in the Roth that guaranty a maximum risk of 5% or less across both accounts. I expect ...
7
votes
2answers
386 views

What does this statement regarding put options mean?

I read an article in the NY Times, but I don't understand what this statement means: “The 16 puts on Cisco are offered at 71 cents. We should buy 1,000,” he says to a trader sitting across the ...
1
vote
1answer
74 views

Protecting Gains: Buying a Put vs. Leveraged Bear Market vs. Liquidating Long Positions?

I am a long investor looking to protect some of my gains in the recent market rally. What are my options? I know of 3 possibilities: Buying a Put (in say SPY) Leveraged Bear Market (say QID) ...
29
votes
10answers
18k views

Options for dummies. Can you explain how puts & calls work, simply?

I never understood Puts or Calls. Could anybody explain it like I were a child?
6
votes
2answers
2k views

Why won't my retirement account let me write a “covered put”?

My retirement account (a traditional IRA) will let me write a covered call, where I sell a call option if I have the underlying securities (for instance, 100 shares of IBM). The shares are required to ...
4
votes
3answers
3k views

How do you calculate the rate of return (ROR) when buying and selling put options?

How do you calculate the rate of return (ROR) when buying and selling put options?
12
votes
2answers
883 views

How can put options be used to buy shares at a lower price?

How to use puts, if you are a net buyer of stocks? I read an article about Warren Buffet buying Burlington Northern stocks and how he used puts to lower the buying price of the shares. Please, ...