i'm not rich and certainly do not pretend to be.
i however do need (would like) $10K by end of year to help pay off my car lease coming due (2004 Nissan Frontier truck). yep, don't drive the porsche or bmw like you rich folks. that means GS needs to go to $400. come on baby, miracles do happen.
You treat the options like stock. You can buy and sell them at will. But keep in mind. You can only sell entire contracts not partial contracts. So when you sell a contract you sell 100 shares!
Another example, GS has a blow out quarter and you want to sell one of your contracts. You were crafty enought to buy 175Jan08 contracts at $25/contact and you want to sell one contract. Now the price is $60/contract. So you sell it and get $6000 (100*60).
There are lots of good books on options. Pick up a few and read..that is what I did. And I am NO expert by anymeans on options. I only have bought calls so far. I was going to execute a straddle on AAPL some time ago. I chickened out and now AAPL is flying. A straddle is buying a call and a put at the same price that expires at the same time. It protects you against severe downside moves but it does limit your upside. If a stock trades in the straddle range than you are screwed.
GS has a strong daily resisance to overcome at 235, then if that is done 245 is possible. So, on good earnings and market still bullish it might happen. But beyond that I don't see it higher for now.
show me the way, brother.
I'm just starting to get the concepts down. Been spending some time on CBOE website trying to get the lingo down, process, etc.
I know the basics, but it's always tough pulling the first trade. Any good websites or books you could suggest that kind of walk you through it.
The one thing that confuses me is lets say you buy calls. Do you have to wait till they hit the strike price before you can sell them, or can you sell them at any point before expiration date?
Its time for a math example....I am doing this to show you how options work and why they are a better choice than buying a small number of shares in a situation like GS.
Lets take today's action. GS closed +5.79. If you owned 25 shares than you made $144.75. If you owned 3 175Jan08 call contracts you made $5.13/contract which translates to $5.13*300 shares. That comes out to $1539!!!!! If you bought those contracts a FEW months ago you probably paid on the order of $25 to $30 per contract. So if we take $25 you total investment is 300*25=$7500 (excluding comissions).
Your total profit over the period is 300*(62.40-25)=$11220.
Again excluding comissions.
That is the power of the long call or leap. IMHO this stock is way too cheap given is p/e and earning potnetial. The only issue is one needs to monitor the contracts and don't hold them too close to expiration due to decreasing time value.
I hope this helps.....seriously, you should cash out your 25 shares and buy some leaps. You will make a lot more money!
No kidding if you have 2300 shares vs. 25 of the same stock you're going to make more money with 2300 shares. Don't think I understand your point. If I had the money to buy 2300 shares I would. I only have the cash right now to buy 25 shares.
My point is if you own 25 shares at $200 = $5000. If you own 2500 shares of a different company at $2 = $5000. Your stake in the game is $5000, not how many shares you own. That's all relative. For each 1% move in either stock that will make you $50. Doesn't matter how many shares you have if you're comparing apples to apples (or loaf of bread to loaf of bread)
LOL. Got you beat. I've got 23 at $222.02
I could have bought more but decided to diversify into a few others. Wish I didn't because I'm down there, up here, but that's how the game goes. I used to pour my $15-20k into one stock. Sometimes good days, but mostly bad.
Looking for great earnings tomorrow and a nice big and steady move over the next few weeks.
Could you explain the theory behind buying 25 shares? If the stock is up ten points, you will make 250 minus commissions. The risk reward ratio doesn't seem very persuasive. Should someone who can only afford a 5000 investment try to make money with a 230 stock? What is your thinking?
You should buy calls like me. Then you will be rich in no time! :)
For example, your money can buy 30 contracts of Jul 250 call @1.75. If we goes to 260 by the end of Jul 20th, you will make $24,750 by then and buy half a porsche! ;)
i've been looking at options on this, but a bit too risky for me. if i had extra cash i definitley would have. i bought GS at $200 ($5K total investment). maybe what i should have done is buy $4k of stock and $1k of options. problem with options (as you well know) is that 1 contract is 100 shares. so its hard for us small fish to really play.
good luck, i hope GS is at $300 by july expiration. they you can buy a porsche and i can pay off most of my truck.