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58

Out-of-the-money options close to expiration often have no bids. If no one is willing to pay even $0.01 for them, you will have to let them expire worthless. Your loss essentially already happened when the underlying failed to surpass your strike; you would at best be fighting to salvage pennies now.


23

Short sales have a lower direct cost (i.e., the price of the put option), and so also a higher potential profit, but a much higher risk. Unhedged short sales are incredibly risky, of course, but they're typically hedged in one fashion or another. Put options are fairly expensive, so they won't necessarily be profitable unless the stock depreciates ...


12

As an analogy, consider people betting on an (American) football game between Team A and Team B. Let's make buying the option analogous to betting on Team A. Then selling it is analogous to betting against Team A. The sale price of the option is analogous to the odds a bookie will offer. The expiration date is analogous to the end of the game. Being OTM is ...


11

You can always sell your calls at the market price (the bid). If the trade did not execute then you are asking for a price greater than the market price. If the bid is zero then it is highly unlikely that anyone is going to take them off your hands even for mere pennies and you can chalk this one up as a total loss. The opportunity to minimize your ...


8

Post some replies to other questions and you'll have a 50 reputation in no time. Or make the check payable to me for overnight service ;->) Here's part of my answer from the link: "There are no free lunches and if it sounds too good to be true, it is." I suppose you want something of greater substance than that, eh? If there is a pending ex-div date, ...


6

While researching stock options, I have read in many places that options meet the following ends with the following frequencies: ~10% expire worthless ~10% are exercised ~80% are traded away; the position is closed. How is this possible? If an option is traded away, the subsequent owner must then make the same choice: let it expire, ...


6

Yes, the potential loss for a short seller of stock is almost unbounded but no stock has ever gone to infinity. Anyone with any experience with shorting would practice disciplined risk management should a short position move against him. Yes, a gap can hurt but no trader with a lick of sense doesn't cut losses. As for long puts versus short stock, ...


6

I doubt it, since CDs are FDIC insured and mainly target retail savers/investors. More sophisticated investors have bond options, interest rate options, caps/floors, and other interest rate derivatives to choose from, as well as bespoke structured products.


6

buying a call option on a stock when you believe it will go up will never yield as much profit as simply buying the stock outright. Suppose Apple stock is trading at $100 and you think it will go up. You have $10,000 to invest. You could buy 100 shares, and if it goes up, you'll make $100 for each dollar it goes over $100. Also suppose that call options ...


6

GE's Merger with Wabtec (WAB) was completed, which means that the 100 shares you have an option on now include a cash component, and are "non-standard". It's possible that your broker sold (closed) these options for you since they'll be harder to sell in the open market, but it's hard to tell from what you've given. Based on the identifier, you seem to have ...


6

There is no "true price". There is the last price an option traded at — but as you have discovered, if a particular option is thinly traded (and many options are thinly traded) then the last price quickly gets stale and isn't useful for informing what price you might actually fill at for an order you're contemplating. You need to look instead at the ...


5

The author is wrong in saying that buyers of calls almost always hold the calls until expiration. According to stats provided by the CBOE for 2017: 1) About 10% of options were exercised (gain or loss) 2) About 60% were closed before expiration 3) About 30% expired worthless In your scenario, if you bought $50 calls and two weeks later the stock rose to ...


5

Options that trade in the U.S. are either American (stocks and ETFs) or European (most indexes) style. The owner of an American style option may exercise it at any time during the life of the contract. A European style option can only be exercised at expiration. Exercise before expiration isn't very common. Per 2017 stats from the Option Clearing ...


5

For a stock that has lost 45% of its value, there is no zero cost option strategy that can be utilized to recover such a loss. With a fair amount of luck, you might be able to recover a chunk of the loss if the stock cooperated, but they rarely do. For a stock that has dropped maybe 10-20 per cent, you can use a Repair Strategy to recover losses. For ...


5

The reason that the calls appear to be down is because due to lack of trading, the last price occurred yesterday or earlier at a lower stock price. For example, the Jan '21 145c is $45.30 x $47.40 with a last trade of $39.90 . It's a stale quote. There are lots of issues with these LEAPS. They have low Open Interest, most haven't traded today, the few ...


4

The statement by Robinhood that "if the contract is about to expire and is out of the money, they will automatically sell it back in the market so I don't lose all of it" makes no sense at all. Only the owner of the long contract can make the decision to sell or exercise the long contract prior to expiration (ignoring an auto-liquidation event by your ...


4

what is the 0.25 if it's not the price It's the limit price that you apparently set. At that time, you could instantly buy an option contract for 0.27 per share (the ask price), but a limit order tells the broker to "buy when the price is 0.25 or lower". So your order might be filled later or not at all. why was this so expensive An option contract is ...


4

In general "executing" an option means doing whatever you have the option to do. For a lease with an "option" to buy - executing that option means buying the leased item (which probably means at least a signed purchase contract, perhaps not the actual transfer of funds). In employment contracts, if you have an "option" to extend the contract, executing that ...


4

My professional area is option contracts. Yes, they are that dangerous. On the other hand, they can be very useful and valuable parts of a very conservative portfolio. They are somewhat like a loaded gun with no safety that has been cocked. If you know what you are doing, they are nearly safe. Police officers and military snipers do sometimes discharge ...


4

Here's an example from today that demonstrates my previous explanation about the relationship of put and call premium to a dividend. CE closed at $113.98 today. The August $110 call closed at $4.40 x $4.90 and the Aug $110 put closed at $0.90 x $1.10 . The spreads are pretty wide and fair value is somewhere in the middle. I'm going to take the liberty ...


4

Not sure what you mean by "normal" but the CBOE lists options on Exchange-Traded Funds. One example is options on the SPDR ETF. I do not know of any options on mutual funds, but certainly an OTC option contract could be written.


4

the call buyer might prefer to exercise the option as soon as it's in the money, and not wait until expiration (when it might be out of the money). Not really. Suppose you have an american option to buy a non-dividend-paying stock at $50 that expires in one month. The stock is currently trading at $45. True, you could exercise now and pocket an easy $5, but ...


4

If the company is acquired for cash, the expiration of the options expiring after the acquisition date will be accelerated to the acquisition date. Since your proposed scenario involves $20 per share, your short $10 puts will expire worthless and you will keep the premium. However, if the acquisition is for shares only or for cash and shares in the ...


4

As I stated in another post, I tell everyone that wants to speculate with options, not to. They are statistically priced to whereas either buyer or seller you should not win or lose. Therefore if anyone suggests a 'guaranteed' strategy to make money with options, I advise you not to listen. Reality though is most people that buy options lose their premium ...


4

In the absence of liquidity, the market maker sets the price because hardly anyone else is offering to buy or sell the security. If traders put in more competitive bids and offers, the spread narrows. The rule of law in US financial markets is NBBO (National Best Bid and Offer) so whoever is offering to buy at the highest price or sell at the lowest price ...


4

A call is out-of-the-money (OTM) if the strike price is higher than the market price of the underlying. A put is out-of-the-money if the strike price is lower than the market price of the underlying. If an option is OTM, all of its premium is time premium. Your put has a strike price below $74 so all of it is time value.


4

If those are the respective real time quotes then yes, you could do a Discount Arbitrage (buy call, exercise call to acquire stock, and sell stock. To avoid slippage, you'd buy a Synthetic Put via a Combo Order (buy the call and short the stock) and then exercise the call to close the position. The reality of these 'free lunch' situations is that: you're ...


4

A corporate event has resulted in the adjustment of some GE options today. I can't provide the link because since I am registered with the OCC, the link page includes my name. If you google " GE component of the GE1/1GE1/2GE1 ", it will bring up a link to the OCC memo. If you own one of the adjusted symbols, your previous position will be gone and it will ...


4

Say I call a stock at $50 for a price of $5 for 30 days. Now, based on my understanding I will pay a fee of $500 for the options trade - (cost is $5 and the call is generally for 100 shares) Standard options are for 100 shares. Corporate events (some stock splits, special dividends, spin offs) result in non standard options. Non standard options can be a ...


4

The SPDR® S&P 500 ETF Trust (symbol SPY) seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index. https://us.spdrs.com/en/etf/spdr-sp-500-etf-SPY Options are available on the SPY: http://www.optionistics.com/quotes/stock-option-chains The call's premium will ...


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