All things STOCKS

#5,152
#5,152
Firebirdparts said:
So nobody here talks about NVAX. It has gone up from a penny stock to $150. After hours tonight it traded at $100 and $170 on the same night. Evidently some kind of typo/mixup on something. I am somewhat entangled in it with shares, calls, and puts all three.
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Go ahead and grab your position in airlines, hotels, casinos, etc... Vaccine news will make them double, at least.
 
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#5,153
#5,153
mr.checkerboards said:
I can give some advice, but there are others in here that know more than I. When you buy a call/put you are buying 1 contract but the contract equals 100 shares. At .25 it should cost $25 for the contract. What these do is gives you the right to sell or buy the desired strike price by a certain date. The $25 you paid for the contract is a premium that gives you the right to do that. Most people make money on these buying or selling the contracts before they expire. Most of these contracts actually expire worthless. The risk is that you can basically have infinite losses with these especially if you are buying puts. The safest thing to do, is covered calls, which means you own 100 of that stock and then chose a strike price of which you wish to sell that stock for. Then someone pays you a premium to buy the contract that gives them the right to exercise that contract if they wish. Doing this basically caps your gains. If the stock goes to $3 and your strike is $2 then whoever bought your contract will have the right to buy those shares from you at $2. However it is a good way to recoup losses as most people make money selling the premiums over and over while the contracts expire worthless.
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The buyers of options don't risk infinite losses. Their losses are capped at their investment. CALL sellers are exposed to the infinite losses. PUT sellers losses are limited to the strike price.
 
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#5,156
#5,156
mr.checkerboards said:
I can give some advice, but there are others in here that know more than I. When you buy a call/put you are buying 1 contract but the contract equals 100 shares. At .25 it should cost $25 for the contract. What these do is gives you the right to sell or buy the desired strike price by a certain date. The $25 you paid for the contract is a premium that gives you the right to do that. Most people make money on these buying or selling the contracts before they expire. Most of these contracts actually expire worthless. The risk is that you can basically have infinite losses with these especially if you are buying puts. The safest thing to do, is covered calls, which means you own 100 of that stock and then chose a strike price of which you wish to sell that stock for. Then someone pays you a premium to buy the contract that gives them the right to exercise that contract if they wish. Doing this basically caps your gains. If the stock goes to $3 and your strike is $2 then whoever bought your contract will have the right to buy those shares from you at $2. However it is a good way to recoup losses as most people make money selling the premiums over and over while the contracts expire worthless.
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Question with regards to commodities call options. How often are call options settled in cash instead of exchanging the actual commodity?
 
#5,157
#5,157
Rasputin_Vol said:
Question with regards to commodities call options. How often are call options settled in cash instead of exchanging the actual commodity?
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Im a fairly new trader, so I dont have a ton of options, but from what ive seen/researched not very often. Usually they are sold or expire worthless. However ive seen where people have the stock assigned and then start doing covered calls with them until they can get rid of them.
 
#5,159
#5,159
Thunder Good-Oil said:
The buyers of options don't risk infinite losses. Their losses are capped at their investment. CALL sellers are exposed to the infinite losses. PUT sellers losses are limited to the strike price.
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Yep.

Just to add a bit more wordy explanation for those not familiar, the theorietical risk of selling PUTS is the strike price of the stock × 100 for each contract. This assumes the stock price falls to zero.

As for selling CALLS, many use covered calls so that the risk is defined, whereas naked calls have a theoretical unlimited risk since the potential upside of a stock price is infinite.

As for buyers of options, the risk is limited as TGO pointed out, because buyers of options have the right but not the obligation to buy or sell shares. Thus the risk is limited to the price of the option.

I like to sell PUTS and collect the premium for stocks I wouldn't mind owning/holding. And I like to sell covered calls and collect premium on several stocks I'm already holding long term in my portfolio.
 
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#5,167
#5,167
Hopefully looking at 3 green days in a row. Up about $90 on the day so far. Portfolio is slowly bouncing back after some bad purchases and not selling when I should have (like when GNUS hit $4 a couple weeks ago). Hoping to free up my bags in GNUS, KTOV, and IDEX the next couple of weeks as they are all showing signs of life recently. I'm also bagging on LCA, but I think it will just have to take the L on this one soon. I don't hold a large positon anyways. Another mistake where I let a swing turn into a bag, trying to hit gold.

Since I've started investing wiser and looking for good entry/exit points, I have performed much better. I haven't hit on much but I also have not lost much. After I identify my entry points, I'm learning to be patient and wait for my turn. BKYI, NCMI, and PULM are my most recent plays, and PULM is the only one I'm currently losing money on, and I'm down only about 6% from my entry while the stock remains oversold. It has a pretty large gap to fill the next time it bounces though.
 
#5,173
#5,173
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