Bearish Butterfly Rapid Options Learning

If you have any questions, please feel free to contact myself at sherri@lockeinyoursuccess.com or Dave at dave@lockeinyoursuccess.com and we will be happy to answer all your questions.

We will be taking a break from our monthly webinars but will still continue to post content to our blog, Facebook, and YouTube channel!  When we return we will discuss many different aspects of financial freedom, which will mostly fall into the five categories of business development, real estate, career development, stock trading, and money management.
 

 

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Call maybe or put?

Image12 courtesy of StuartMiles at freedigitalphotos.net

Image12 courtesy of StuartMiles at freedigitalphotos.net

Do you want to control large amounts of stock for pennies on a dollar? Well who wouldn’t? With call and put options you can!

Each option that is purchased controls 100 shares of stock. For example the cost of an option might be $3 per share, so to control the 100 shares of stock it would cost $300. To purchase that stock, it might be $160 per share, so to purchase that same 100 shares would cost $16,000. With options you have the power of leverage!

Call and put options give you the right to buy (call) and sell (put) a stock at a specified price for a certain period of time. Always remember there is a time element to these options and you will recognize a gain if the stock price goes up (call) or down (put) enough to cover your costs (the stock price plus the cost of the option). If the option expires at or below the stock option price they are worth nothing. Zero, zip, nada! Keep your eye on those options…

Please comment on your success with trading stock options.

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Investigate options

Image courtesy of iosphere at freedigitalphotos.net

Image courtesy of iosphere at freedigitalphotos.net

There are many different ways to invest in the stock market. Would you consider investing in “the right” to buy an asset?  If you trade stock options, you are buying the right to buy shares of stock.  The definition of an option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.

This scenario may help to further clarify how options work… The good new is you have finally found your dream home! The bad news is you don’t have enough cash to buy it. You decide to try to strike a deal with the owner that gives you the OPTION to buy the house for $400,000 in six months after you come up with the cash.   For this OPTION you pay the owner $6,000.

Consider these two potential story lines:

  1. During an inspection, the inspector comes across a stream in the back yard that is FULL OF GOLD! The property is now worth $5 million and because you purchased the option, the owner is obligated to sell you the house for $400,000. The profit on this transaction would now be $4,594,000 ($5 million – $400,000 – $6,000).
  2. During an inspection, the inspector comes across waste oil that has contaminated the soil. The cleanup costs will run into the millions. What you thought was your dream home now turns out to be your worst nightmare. But don’t fret! Because you bought an option you are not obligated to purchase the property. You will however lose the $6,000 you paid for the option but you have saved millions!

Options are derivatives; they derive their value from something else. With stock options, most of the time, the underlying asset is a stock or an index.  Click here to learn more about stock options!

Please click like if you trade stock options.

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