2. Each option relates to 100 shares of stock.
3. Liquidity is the "a priori" of trading, along with risk. Without liquidity, you have no idea how much slippage there will be, what price you will get, or if you can get out at all, at least at a favorable price. This is a horrible bid/ask spread at 0.40 cents. You want this to be near a nickel or a penny. You have to make forty or fifty cents just to break even. Not good odds, and not a good trade for a trader that values liquidity.
4. Read #1. You are NEVER "required" or "obligated" to do anything. Read the definition of an option. You are trading the option for a price increase or decrease in the option. Nothing more. You do, however, have the right to purchase the stock at the strike. But then, you can ALWAYS pay more than the stock is worth, with the option or without.
You buy the call option at $3.50 and sell it at $4.00 or $4.50, whatever. Or you get stopped out at $1.50 or $2.00 if it goes against you, or you let it go to zero. Your trade in the option has nothing whatsoever to do with the stock, unless you want it to (it's your right to pay more than the stock is worth if you want).
You have a lot of reading to do before you're ready to trade options. Learn about the Greeks and implied volatility and risk and probability of success (or probability of expiring in-the-money). Options are a wasting asset, and most of them are designed to expire worthless. When you buy one, you are saying that you know something the experts don't. Probably best to buy spreads so the wasting premium of the short option works for you, rather than a single option wasting to zero against you. The more time you buy, the better your chance of success. Most newbies concentrate on far out options with little time remaining because they're the cheapest. Focus on risk, not mythological potential profits.
The guru on options is Lawrence McMillan. Anything by him will be useful. I think this is his latest book.
http://www.amazon.com/Options-Strategic-...
You can get this book through the Interlibrary Loan System for free.
buying a $30 Feb call option means you have the right, but not the obligation to purchase 100 shares of the stock at $30 (one option is for 100 shares) on or before the Feb 22 expiration date. You are BUYING the call option for $3.50 per share, with one option representing 100 shares that would cost you $350.00 plus commissions. If the stock increases to $35.00 then this is in your favor as you could exercise the option and purchase the 100 shares at $30.00 or $3,000.00 plus commissions and you would have invested $3350,00 plus commissions and the value would be $3500.00 less commissions.
If the stock stock falls below $30.00 per share than you would be out the $3.50 per share. Your break-even (less commissions) is the stock would need to rise to $33.50 by the explorations date.
Hope this helps.
It's really possible to make money with trading online, specially with binary trading. You have just to know where to learn... and I know the best source ( http://forexsignal.kyma.info ) This course explain everything you need to start a very profitable trading activity. Before you "learn" to day trade you first must understand the markets, the products traded in the markets and the rules you have to follow to be in the market. You have to learn what to do, why to do it, when to do it and how to do it. If can learn all of this then and only then can you day trade. Before you day trade you must be able to trade. You also need a written sound trading/investment plan with rules that will not only help you but more importantly protect you, mostly from yourself. You also need sufficient trading/investment capital. Use your own money, there’s no need to go into debt so that you can trade/invest. It is more imperative to have a written money management program in place. Remember never invest 100% of your capital into any one security and never have 100% of your capital invested and a good understanding of the rules
I suggest you to don't let yourself to be fooled by get-rich-quick stuff like reverse strategy. Many of my colleagues have lost their money into this mess and trust me these are 100% pure scams. But some stock trading options are good. My uncle even got a very nice tutorial from http://amzn.to/1ynhZSe and that really helped him in earning $$$.
Can someone explain stock options to me?
Before you answer please go to this link: http://ca.finance.yahoo.com/q/op?s=BITA
the option quote: BITA140222C00030000
Okay so let's say I want to buy a Call option for 30$. The ask price is 3.5$ (for the contract), and expires Feb 22.
Questions
1: Does that mean that if I pay 3.5$ premium I buy the stock for the current price (31.14) and sell it at 30$ when and if that strike date hits?
2: If so then how many shares can I buy with that single contract (BITA140222C00030000)
3: because the volume is so low does that mean that it will be hard for me to buy the option?
Thank-you
40 minutes ago - 4 days left to answer.
Additional Details
!!!!!!!!!!!! EDIT!!!!!! Question 1: Does that mean that if I pay 3.5$ premium I buy the stock for the current price (30)** and sell it at 31.14**$ when and if that strike date hits? !!!!!!!!!EDIT!!!!!!!!
4: Also lets say the stock moves against my favour and increases to 35$, would I be required to now buy the stock at 35 and sell it at 31.14$?
Thank-you
