NEW YORK, May 29 /PRNewswire-FirstCall/ -- The American Stock Exchange� (Amex�) will launch trading in options on Friday, May 30, 2003 on the following Amex and New York Stock Exchange listed stocks of:
-- Metris Companies Inc. (Symbol: MXT)
Metris Companies Inc. options will open with strike prices of 5 - 7-1/2 - 10 and position limits of 75,000 contracts. The options will trade January expiration cycle. The specialist will be LaBranche Structured Products, LLC. Metris Companies Inc. is an information-based direct marketer of consumer credit products, extended service plans and enhancement products and services to moderate income consumers.
The naked options I was referring to were "buying" calls or puts. This is a lot less risky than selling naked calls and puts.>>
Buying is no less risky than selling.
<<I'm sure you are right that very few brokers would allow investors to sell naked calls.>>
You're not understanding the level requirements. You're required to have a level 3 option account to *buy* naked options. A level 3 also allows one to sell options. It is NOT an either or.
<few brokers would allow investors to sell naked calls. I don't even know why anyone would want to do that.>>>
If an investor wanted create a spread he would buy and sell a call option on the same stock. This is just one of many very valid reason to sell options- generating income is another.
The naked options I was referring to were "buying" calls or puts. This is a lot less risky than selling naked calls and puts.
I'm sure you are right that very few brokers would allow investors to sell naked calls. I don't even know why anyone would want to do that. It is obviously a lot riskier than selling stock short because of the extra leveraged risk that the investor assumes.
Please note that the above statement is not true. Most investors can trade naked options>>
I don't know who you trade with, but most responsible brokers, Schwab, Fidelity, etc., require a high level of experience and net worth in order to trade naked options.Think about it. If an investors sold 1000 90.00 strike call option options on IBM and was called he would need 900k liquid cash in order to buy and deliver IBM. Trust me. Very few investors qualify for level 3 option trading.
<= There's much more risk owning an option than a stock. =>
With options, while there is indeed a greater risk that you'll lose your entire investment, you don't have to risk as much money to have a big score.
<= Very few investors qualify to trade naked options. =>
Please note that the above statement is not true. Most investors can trade naked options provided it is not done in an IRA account. I used to be a frequent trader of naked options, and still do trade them on rare occasions.
They'll have greater leveragability and less risk with the puts. >>>
You're correct about the leveragability. However, there's much more risk owning an option than a stock. Very few investors qualify to trade naked options. There is a good reason for that :)
I asked a friend about this because I'm someone who is new to this. Here's his explanation.
Sorry I did not get back to u earlier on this. It doesn't mean much except that you will prob see more volume trading in this stock and maybe more volatility but on the whole should not mean much. All options are are contracts to buy (a call) or sell ( a put) a specified number of shares of a stock at a specified price (the strike price) for a limited period of time. So you can control much larger blocks of stock for a lot less money than owning the stock out right. It is a little more complicated than that but can't do in an email. If you want to discuss call me.
You might be able to buy for $100. an option to buy 1000 shares at price of say $6. but only until say July 15th. If the stock is at $5 today for $100. you control $5000. worth of stock. Now if the stock on 7/15 is $5 or less you let the option expire and you lost $100. If on 7/15 the stock is more than $5 you exercise your option you acquire the stock and can immediately sell it. So let's say the stock is at $10. on 7/15. For $100. investment you made $5000. It works in the reverse for selling a stock. That is called a put where u buy the right to sell the stock at a specified price, sort of like shorting a stock.
I'll admit that I might not know all of the ins and outs of short investing, but could somebody explain to me why someone who shorted the stock at $7 or $15 wouldn't have covered when the stock was below $2? How much lower was it supposed to go?
You stop making money when it goes to $0, right?
>> see your point. For example, people who shorted 1,000 shares at $7.00 could buy 10 MXT $5.00 calls with an expiration date to match the length of time they expect to be short the stock. In this way they lock in $2.00/share on the 1,000 shares.
Minus the premium they paid for the call, which will be greater than $2