Options versus Stocks

[proton91]

Hi guys,

I have been investing in stocks for the past 3 years but new to options and getting myself up to speed with the topic.

For e.g. Stock A is priced at $5 today. I buy 1 contract of Stock A's call option for say $2.50 * 100. So by paying $250, I get to "indirectly own" 100 shares of Stock A.

In this case, the capital is only $250 for the option compared to $500 if I were to purchase the 100 shares of Stock A.

And if Stock A increases to $5.50, the option premium will then increase in intrinsic value which means that I will benefit from capital gains of 100 shares even though I do not directly own Stock A.

But flip side is that I could lose my entire premium if the option is OTM by expiry, compared to the actual stock where I will still own the stock even if price drop and I have the luxury of time to wait for it to rebound.

Is my thinking above accurate?

 

[Shiny Things]

Is my thinking above accurate?

Yep, exactly right. You've just described buying a call option.

Options also let you blow yourself up in more interesting ways (if you sell options), or bet in a less-dangerous way that a stock will go down (if you buy a put option).

 

[YouHeypiCanLiao]

Go youtube and watch at least 50 hours of them . Then can become expert Liao.

Hi guys,

I have been investing in stocks for the past 3 years but new to options and getting myself up to speed with the topic.

For e.g. Stock A is priced at $5 today. I buy 1 contract of Stock A's call option for say $2.50 * 100. So by paying $250, I get to "indirectly own" 100 shares of Stock A.

In this case, the capital is only $250 for the option compared to $500 if I were to purchase the 100 shares of Stock A.

And if Stock A increases to $5.50, the option premium will then increase in intrinsic value which means that I will benefit from capital gains of 100 shares even though I do not directly own Stock A.

But flip side is that I could lose my entire premium if the option is OTM by expiry, compared to the actual stock where I will still own the stock even if price drop and I have the luxury of time to wait for it to rebound.

Is my thinking above accurate?

 

[anderson666]

There are oso directional neutral strategies such as iron condor, straddle butterfly etc. Go n google options strategies bro. But i dunno if u can play wif the greeks la.