Lux Investing
Investing in options?
If I invest in options will I lose my money if the value decreases? Or will I lose the money until the option expires?
Public Comments
- Why art thy try!
- There are 4 ways to invest options. You can buy or sell puts or options. If you buy a put and the price goes up, you lose money because you've bought the right to "put" it at the strike price when you can sell it cheaper without the option. If you sell (or short) a put, then you gain money as price goes up. You sold the option to someone and they won't execute it because it will cause them to lose money, so you earned the paid premium. If you buy a call and the price goes up, you earn $$. You can "call" (or buy) it at the strike price and sell it at the higher market price. If you sell a call and price goes up, you lose money. That person who bought will cause you to sell it to them at a lower price when you could've sold it for market. I'd suggest sticking to buying options. You can never lose more then the premium you paid for it. I love options!
- If you buy options, you money for the right to buy or sell something at a fixed price at a fixed date in the future. If the current price of the thing you optioned is better than your option price, then your option is worthless.
- yes, you will lose all of your money if the option expires Options are the most versatile trading instrument ever invented. Since options cost less than stock, they provide a high leverage approach to trading that can significantly limit the overall risk of a trade or provide additional income. Simply put, op tion buyers have rights and option sellers have obligations. Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock (or futures contract) at a specified price until the 3rd Friday of their expiration month. There are two kinds of options: calls and puts. Call options give you the right to buy the underlying asset. Put options give you the right to sell the underlying asset. It is essential to become familiar with the inner workings of both. Every strategy you learn from this point on depends on your thorough understanding of these two kinds of options.
- An option tracks an underlying asset - a company's stock, or commodity like gold. The value of the underlying asset and the time to expiration effect the value of the option. If you have purchased a call option (right to buy at a specified price) the value goes down as the value of the underlying asset drops. If you have purchased a put (right to sell at a specified price) the option value goes up as the value of the underlying asset goes down. For puts and calls the value decreases over time - hence if the underlying asset value does not change today the option will be worth less tomorrow.
