Newbie Question

Quote from DiagonalSpread:

Why is it so hard to believe there is an imbalance of buyers and sellers?
More...

What's hard to believe is that there is an imbalance of prices.

Why? Because in the time it took you to ask us how many contracts to trade, someone else would have pounced on it (because hey, free money), and the resulting volume would have driven the price back where it belongs.

Nobody is in the business of giving away free money, least of all market makers with razor-thin profit margins.
 
Thanks, Spin.

That other board was like watching one monkey on a thousand typewriters. Moderated boards make me happy. More wheat, less chaff.
 
db,

We're refugees from the unmoderated Yahoo Option bb's which used to be pretty decent but went into the crapper due to a coupla clowns.

C'est la vie, c'est la guerre, c'est no more.
 
Quote from spindr0:

db,

We're refugees from the unmoderated Yahoo Option bb's which used to be pretty decent but went into the crapper due to a coupla clowns.

C'est la vie, c'est la guerre, c'est no more.
More...
I see. Well, it's nice here at ET, I like it. People are usually pretty friendly and open minded, although there are some exceptions.
Anyhow, welcome to all the newcomers!
Cheers
db
 
Another newb question.

If I want to play a simple call / put, how do I figure out what

strike to buy? (no leaps). Is something like this just pure

speculation or is there a method?. I ordered a book that should

explain this as well.
 
Quote from cashmoney69:

If I want to play a simple call / put, how do I figure out what strike to buy?
More...

In general, your strike price selection depends on your outlook for the stock.

If you're writing options, the ideal scenario is for the option to expire right at the money. You will get the maximum profit for that trade, and it will be more profitable than options that expire worthless farther from the money.

If you're buying options, you can figure out where you expect the stock to be in the near future or at expiration, and roughly calculate percentage returns based on current prices at various strikes.

In general, when you trade simple combinations like covered calls, spreads and collars, the writing rule applies. You want your short strike to expire at the money.

You can also give up some profit margin to boost your chances of success, by writing farther from the money or buying closer to the money. That's a question of personal risk tolerance, and the decision is yours alone.

Happy trading.
 
You must log in or register to reply here.
Back
Top