Stock options trade independently, of the stock itself. Call options has leverage meaning the stock could move 10% and your call option could be worth 80% or more. Volatility also, affects the option price. To find out what your call option is worth, look at the option chain and find the strike price. It would give you the last price paid for your call option, also, the current bid and ask price of that call option. Your breakeven in your example is the strike price of $103 plus the $10 premium is $113. You will not be making monies until your stock is above $113 which is your breakeven. Expiration too is important because it is the last day you can sell your option.
Call options buying
- Thread starter cashclay
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Stock options trade independently, of the stock itself. Call options has leverage meaning the stock could move 10% and your call option could be worth 80% or more. Volatility also, affects the option price. To find out what your call option is worth, look at the option chain and find the strike price. It would give you the last price paid for your call option, also, the current bid and ask price of that call option. Your breakeven in your example is the strike price of $103 plus the $10 premium is $113. You will not be making monies until your stock is above $113 which is your breakeven. Expiration too is important because it is the last day you can sell your option.
Looks here like you are still confused. An option is an instrument, like a stock or future, that can be entered and exited at any time you desire, BEFORE expiration.
Your net profit is simply the price of the option(s) at entry, less the price at exit. If, for example, prior to expiration you pay $10.00 for a single contract when you enter, and $11.00 when you exit, you've made 10%, less commissions.
For new traders, the confusion is usually when considering the implications of holding until expiration. But again, PRIOR to expiration, options can be traded just like any other financial instrument.
You're welcome... did this example clear it up for you? I know how confusing some of these articles can be... they throw a lot of jargon around and say a lot without clear examples. I think that some of them are computer-generated.
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Long options (calls and puts) gives you the right, not the obligation to either own the shares or to sell your shares. Sellers (shorts) have the obligation. But most options traded are for speculation with no intention to exercise.
sell your options before expiration and they won't be exercised.
i don't have "option" in my user name, so maybe you know more than me on this topic. what's untrue about my post? I'm genuinely curious for an explanation
Now im confused again lol. Are you talking about the premiums? If the BID / ASK is 1 and 2$ and I buy a call option at 1 $. If the stock moves in my favour to BID/ASK at 2 and 3$ do i only make 1$ * 100 shares?
I thought it was the difference that the strike and stock price * 100 shares(1 contract) - premium fees.
use this link to check out your favourite option plays and see what they are worth at different prices of the underlying stock
https://www.optionsprofitcalculator.com/calculator/long-put.html