| Author | Message | ||
     Gudivada04 Bewarse Legend Username: Gudivada04 Post Number: 44641 Registered: 09-2004 Rating: N/A |
kaadu. Calls ante fundamentally you are betting that stock will go up. one call = right to buy 100 shares. 100 shares of MSFT at current price means you need to invest $20,954. Where as I have paid $4,300 for that call. lets assume two scenarios: If the stock goes to $230 by Jan next year, my call would be worth at least $6,000 i.e., ~40% gain. If the stock goes down to $170, my call is worth zero. I can either let it expire worhtless or choose to exercise the call and buy the stock, meaning I am sitting on a $4,300 loss on 100 shares. DIM money option on a stock that you strongly believe and moves in your preferred direction gives you better return than owning the stock outright. also less capital requirement at the start.. |