how would you like to buy intel for 67 tomorrow-or do you absolutely insist on 65.
you can buy it at 67. sell jan 99 puts (80 strike price) sellers are paying the buyer 13. I f the stock never moves you pocket 11 bucks per share-if it goes up to 100 you pocket a 13 per share profit-if it goes down to 65 (your desired price) you lose 2 bucks. this way you get compensated for spending so much time on the board. there are other strike prices-and payment s etc.
If the stock goes below $67, the stock will most likely be put to you. i.e. you will have to purchase the shares at $80/share. This will force you into a long position if you don't want to take the loss. You will at this point have the $13 as premium for selling the put - so your effective purchase price is $67. But if the stock drops more, you'll still be buying the stock for $80 when the shares are put to you. 1/99 is a long way off.
If you are VERY bullish on INTC (I'm am and I'm thinking of doing the following). Buy 100 shares at $79 - at the same time write a covered call and a put. Both with a strike of $80 and expiration of My '98. You will collect 2 premiums, $3.375 and $4, for the call and the put respectively. If the sctock goes above $83.375 the shares will be called away from you at $80 giving you another $1. At this point, you'll will have ho position in the stock and a tidy $8.375. If the stock goes below $76, the shares will be put to you and you will have 200 shares of INTC at an adjusted price of ($79 + $80 - $3.375 - $4)/2 = $75+13/16. You must compare this last amount to the current price of the stock to evaluate your position at that point. The stock could of course trade sideways and the call and put you sold would expire not exercised (i.e. the stock would be trading between $76 and $83.375). At this point you will have bought your 100 shares for an effective price of $79 - $3.75 - $4 = $71.25.
This has been a useful exercise for me. If you check the boards you will see I have written quite a few posts today. Having to express one's ideas clarifies matters.
My question to you is why not deal in smaller positions but try for a large profit on it. Intel represents an enormous industry. The big premiums represent a conflict of opinions. Make a decision-and bet on it comfortably-not heavily financially-else you will leave most of the money on the table, even if you were right.
I set my limit at 65 because that's what the model said. If it were to actually fall below 70 I might try to use TA to pick a price, if I was watching, but I wanted a limit order in because if it did fall to 65 and I wasn't paying close attention and missed it, I would be pissed :)
I am not very familiar with options and I didn't understand your post. Could you explain it to me a little slower please? Think of me as "optionally-challenged" :)
I am aware that one can do things with options that one can't with stock, and am always interested in learning more.
I spend a lot of time on the INTC board, because this board is a good proxy discussion for the market as a whole.
P.S. take a look at my webpage (see my profile) for a view on the overall market. If you do, send me an E-mail telling me what you think. Maybe we can get together at Damon's sometime :)
cause they got the tv. on to cnbc-damons got those games
options are really easy. they are contracts- pure and simple-an call is an option to buy and a put is an option to sell. they have a time limit. an april expires in april-a july in july. some stocks go way out (they are called leaps). all option k's for us stocks expire on the third friday of the month. Thus they have a time limit and a set price (called the "strike" price). and just like you can go long or short of a stock you can go long or short of an option contract. Thus if you "short" a put -you actually are going long the underlying stock-you are giving someone the right to put the stock to you (sell it) at a set price -the strike-during the set month. For this right they pay a premium since it is their option to go ahead or not. but they pay you for that right. A january ('99) put closed at $13.00 per share on friday. So if you sell 10 (each contract is for 100 shares) you would be "buying" 1000 shares.-now since the buyer of the put is paying you 13,000. and he can sell you the stock at 80 (80,000.) -should he do that-he might do it if the stock in jan"99 is 76 pershare your purchase price is $67 per share (80-13). the limitation is that if the stock goes to 100 you still only make the 13 bucks.-on the other hand it must decline below 67 before you start losing. in the meantime you can short the stock itself to limit your loss-an advantage is that you only need collateral in your account. you can own and collect interest on us. treas. during the time.it's a nice way to earn money as long as you want to own the stock at a set price.incidentally the opposite is also true. You can buy the stock and sell calls above the market e.g. 80's-or not own the stock and just sell put and calls at the same strike price-it's called a strangle. just imagine one paying you 13 to sell the stock and one paying you 13 to buy. if the stock never movesbeyond a limited price or trading range you pocket all the money-of course the reason intel options have a hefty premium is because the stock is volatile.i'll look at your profile later-and i'll let you know next time i'm hoping a flyer.