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Stock Options University Trades Services Tools Feedback Market View Today's News Past Results FAQ Links
Stock Option Investing.com
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Freshman Class
Options vs. Stocks You buy 1000 shares of Intel stock. The shares cost $35 each. You shell out $35,000 plus commissions. Ouch. That's a lot of money. In one month, the stock is at $40 a share. You sell all your shares and make $5,000 minus commissions. Not bad. You made about 12% profit in one month. But what if the stock went down to $30 instead. Well now you lost $5,000. You buy 10 Intel stock option contracts. Each contract gives you the right to buy 100 shares, giving you a total of 1000 shares. You purchase "in the money" options. They have a "strike price" of $35. You want "call" options. {more on these terms later.} These options cost you $2,200. In one month the stock hits $40. You sell your options, {just as easy and as fast had you owned the stock.} Your profit is $2,800. You made about 128% profit in one month. But what if the stock went down to $30. You lose $2,200. Now you see the advantage of options. Leverage my friend. You can only lose what you invest and you know up front what that will be. First, we will discuss what options are. How do they work. What all the "Greek" words mean in English. Why "Buy and Hold" is the worst strategy in the world. Then you can move on to the Graduate School where you will learn the advanced techniques that I have designed.
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