LoveShack.org Community Forums

Reload this Page LoveShack.org Community Forums > Platonic > Business and Professional Relationships

Options


Business and Professional Relationships Networking and maintaining a positive environment in the work place is important! Surviving the 9-to-5 within.

 
 
LinkBack Thread Tools Display Modes
Old 5th February 2010, 8:03 PM   #16
 
Join Date: Jan 2006
Location: Third rock from the Sun
Posts: 11,889
Journal Entries: 2
Quote:
Originally Posted by burning 4 revenge View Post
And thanks for the suggestion about the virtual account Jerbear. Im reading some of the dummies books right now (Investing for Dummies and next up is Futures for Dummies) and when Im done Im going to try a hand at some of those virtual accounts

I dont have investment money now anyways, but Ive never tried to make myself financially literate before, so now at 35 Im trying to understand

I know guys like me should stick to 401 K's and mutual funds, but I do want to learn some of the riskier and potentially more profitable investment posibilities as well
You're a very bright guy. I would also suggest taking a course like "introduction to investments" which will really open your eyes. If you have a background in math, understanding the fundamentals will help immensely! Having a gut instinct helps too.

There is nothing wrong with 401k & mutual funds. I personally suggest maximizing your contributions then build a play trading account. An account that is real money and you can afford to lose it. Start with covered calls & puts then go from there.
jerbear is offline   Reply With Quote
Old 5th February 2010, 8:11 PM   #17
 
Join Date: Jan 2006
Location: Third rock from the Sun
Posts: 11,889
Journal Entries: 2
Quote:
Originally Posted by Trialbyfire View Post
[rant]Mutual funds and other such basket products, are the gift that keeps on giving to much of the investment world. Everyone takes a cut of the capital gains and if there's capital losses, the investor pays and pays and pays.[/end of rant]
No kidding!

12-1b, turnover, distribution, load, and what is with all those new investor classes! Even I got confused!

Oh if you bought an IRA, guess what, IRA fees!
jerbear is offline   Reply With Quote
Old 5th February 2010, 8:42 PM   #18
Member
 
Join Date: Apr 2006
Posts: 12,289
Quote:
Originally Posted by jerbear View Post
You're a very bright guy.
Oh thanks man you too and Ill check out an investment course....I guess I could take one online
burning 4 revenge is offline   Reply With Quote
Old 5th February 2010, 8:47 PM   #19
Member
 
Join Date: Apr 2006
Posts: 12,289
Quote:
Originally Posted by Trialbyfire View Post
Consider these basic examples since there are all kinds of strategies people can play. For ease of single glance calculation, I'm using round numbers v. real examples of percentages, prices, etc:

Stock Future:
Person A agrees to buy 100 shares of ABC minerals on Feb. 5, 2010 at $1/share. Person A will pay x % of this contract upfront like $10 and on Feb. 5, will have to pay the balance $90 and take delivery of the 100 shares.

Stock Option:
Call option - Person A buys 1 contract at the strike price of $1, whereby the underlying security is for 100 shares of ABC minerals at $1/sh with an expiry date of Feb. 5, 2010. Person A pays a $5 premium. When Feb. 5, 2010 comes around, Person A has the ability to let the option expire, losing only $5 or they can exercise their option at any time within the parameters of the rules and regs of option exercising, up to and including Feb. 5. If they choose to exercise the option, they pay $100 for 100 shares of ABC minerals.
Give me an example of why they would be better off losing the $5

Is an option a good way to hedge your bets with a risky investment like a biotech?
burning 4 revenge is offline   Reply With Quote
Old 5th February 2010, 9:26 PM   #20
Established Member
 
Join Date: Nov 2006
Posts: 36,429
Journal Entries: 2
Quote:
Originally Posted by burning 4 revenge View Post
Give me an example of why they would be better off losing the $5

Is an option a good way to hedge your bets with a risky investment like a biotech?
Say as at the time you purchased the Call option, the price of ABC Minerals was $10/sh and the strike price for your options was at $12/sh. You paid a premium of $2/sh. Then, when it came to expiry date, ABC minerals was at $5/sh. As you can see, if you exercised the shares at $12, you would take a $9/sh hit, immediately, including the premium. If you allowed the options to expire, you would only be taking a $2/sh hit, which is the premium.

I can't and won't give you any advice on using options to hedge risk, since it's reliant on how, what, where and when. There are many strategies to use, when hedging against risk but you have to fully understand what you're getting into, including the underlying security itself, and most importantly, staying on top of the entire strategy.
Trialbyfire is offline   Reply With Quote
Old 5th February 2010, 9:30 PM   #21
Member
 
Join Date: Apr 2006
Posts: 12,289
Quote:
Originally Posted by Trialbyfire View Post
Say as at the time you purchased the Call option, the price of ABC Minerals was $10/sh and the strike price for your options was at $12/sh. You paid a premium of $2/sh. Then, when it came to expiry date, ABC minerals was at $5/sh. As you can see, if you exercised the shares at $12, you would take a $9/sh hit, immediately, including the premium. If you allowed the options to expire, you would only be taking a $2/sh hit, which is the premium.

I can't and won't give you any advice on using options to hedge risk, since it's reliant on how, what, where and when. There are many strategies to use, when hedging against risk but you have to fully understand what you're getting into, including the underlying security itself, and most importantly, staying on top of the entire strategy.
Oh so the premium is the difference between the actual price and the strike price?
burning 4 revenge is offline   Reply With Quote
Old 5th February 2010, 9:33 PM   #22
Established Member
 
Join Date: Nov 2006
Posts: 36,429
Journal Entries: 2
Quote:
Originally Posted by burning 4 revenge View Post
Oh so the premium is the difference between the actual price and the strike price?
It's not that simple, so forgive me for making it look so. There's a calculation involved, to get to the premium.
Trialbyfire is offline   Reply With Quote
Old 5th February 2010, 9:33 PM   #23
Member
 
Join Date: Apr 2006
Posts: 12,289
I think I get it

TBF youre a good teacher
burning 4 revenge is offline   Reply With Quote
Old 5th February 2010, 9:34 PM   #24
Member
 
Join Date: Apr 2006
Posts: 12,289
Quote:
Originally Posted by Trialbyfire View Post
It's not that simple, so forgive me for making it look so. There's a calculation involved, to get to the premium.
Oh OK

Nevertheless I now have a starting point to read about options

Before I was clueless
burning 4 revenge is offline   Reply With Quote
Old 5th February 2010, 9:36 PM   #25
Established Member
 
Join Date: Nov 2006
Posts: 36,429
Journal Entries: 2
Quote:
Originally Posted by burning 4 revenge View Post
Oh OK

Nevertheless I now have a starting point to read about options

Before I was clueless
Glad to hear that!

They're fascinating and can be a pain in the arse to administer, from the investment industry perspective!
Trialbyfire is offline   Reply With Quote
Old 5th February 2010, 9:41 PM   #26
 
Join Date: Jan 2006
Location: Third rock from the Sun
Posts: 11,889
Journal Entries: 2
Quote:
Originally Posted by burning 4 revenge View Post
Oh so the premium is the difference between the actual price and the strike price?
Look up the heat transfer formula in physics and the Black Scholes option pricing model.

They both give an idea of how options are priced.
jerbear is offline   Reply With Quote
Old 5th February 2010, 10:08 PM   #27
Established Member
 
Hot Carl's Avatar
 
Join Date: Dec 2009
Posts: 1,084
Quote:
Originally Posted by Trialbyfire View Post
Consider these basic examples since there are all kinds of strategies people can play. For ease of single glance calculation, I'm using round numbers v. real examples of percentages, prices, etc:

Stock Future:
Person A agrees to buy 100 shares of ABC minerals on Feb. 5, 2010 at $1/share. Person A will pay x % of this contract upfront like $10 and on Feb. 5, will have to pay the balance $90 and take delivery of the 100 shares.

Stock Option:
Call option - Person A buys 1 contract at the strike price of $1, whereby the underlying security is for 100 shares of ABC minerals at $1/sh with an expiry date of Feb. 5, 2010. Person A pays a $5 premium. When Feb. 5, 2010 comes around, Person A has the ability to let the option expire, losing only $5 or they can exercise their option at any time within the parameters of the rules and regs of option exercising, up to and including Feb. 5. If they choose to exercise the option, they pay $100 for 100 shares of ABC minerals.
No, that's not right. Quit messing with his head.
Hot Carl is offline   Reply With Quote
Old 5th February 2010, 11:16 PM   #28
Established Member
 
Join Date: Nov 2006
Posts: 36,429
Journal Entries: 2
Quote:
Originally Posted by burning 4 revenge View Post
I think I get it

TBF youre a good teacher
Thanks. I actually suck at teaching normally due to impatience but you pick up really quickly.

Quote:
No, that's not right. Quit messing with his head.
"That's two".
Trialbyfire is offline   Reply With Quote
Old 5th February 2010, 11:17 PM   #29
Established Member
 
Hot Carl's Avatar
 
Join Date: Dec 2009
Posts: 1,084
Quote:
Originally Posted by Trialbyfire View Post
"That's two".
That's two what?
Hot Carl is offline   Reply With Quote
 

Bookmarks

Thread Tools
Display Modes

 

Similar Threads
Thread Thread Starter Forum Replies Last Post
How Do I Get Over A Guy Very Soon? More Options indie22 Dating 4 9th January 2010 4:55 PM
Am I truely out of options? Destacio Marriage & Life Partnerships 3 3rd November 2008 4:20 PM
Any other options? jl5099 Separation and Divorce 1 25th March 2008 8:57 PM
Options... Nappynuts Cheating, Flirting, and Jealousy 3 16th July 2005 10:46 AM
can you have too many options?? homegrown In Search Of... 2 10th July 2005 10:35 PM

 

All times are GMT -4. The time now is 6:37 AM.

Please note: The suggestions and advice offered on this web site are opinions only and are not to be used in the place of professional psychological counseling or medical advice. If you or someone close to you is currently in crisis or in an emergency situation, contact your local law enforcement agency or emergency number.


Copyright © 1997-2013 LoveShack.org. All Rights Reserved.