Options (Beginner)
- Thread starter FortyTwo
- Start date
In your 1st example, why would buying the stock at current price reduce the loss? Buying the stock won't close the options trade.
You will then have 2 separate trades.
Options trade will have the same profit/loss you calculated.
Stock trade will have NO profit/loss until the stock price moves.
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Thanks for the replies particularly the last lengthy reply which I will have to read a few times.
I am here to learn and I am grateful for help. This YouTube tutorial was helpful because it assumed I knew nothing (which is correct) and went through the four options methodically step by step. BUT. . . . . In the two (loss) examples given (Netfilx and ATVI) the tutorial exits by 'Buying and Option' it does not tell me (for my learning) whether the Option holder had any alternative choices e.g. buy shares or take the assigned shares. My question in this post is NOT "what is the best thing to do" my question (for my learning) is 1."what choices good or bad does the Option holder have." For example does the Option holder have just two choices 1. Buy an Option (as was done in the example) OR 2. Let the contract expire and be assigned? Is there a 3rd choice - buy 100 shares?
Please excuse my lack of knowledge I've been at this for just one week.
I am here to learn and I am grateful for help. This YouTube tutorial was helpful because it assumed I knew nothing (which is correct) and went through the four options methodically step by step. BUT. . . . . In the two (loss) examples given (Netfilx and ATVI) the tutorial exits by 'Buying and Option' it does not tell me (for my learning) whether the Option holder had any alternative choices e.g. buy shares or take the assigned shares. My question in this post is NOT "what is the best thing to do" my question (for my learning) is 1."what choices good or bad does the Option holder have." For example does the Option holder have just two choices 1. Buy an Option (as was done in the example) OR 2. Let the contract expire and be assigned? Is there a 3rd choice - buy 100 shares?
Please excuse my lack of knowledge I've been at this for just one week.
Naked Put Choices If ending ITM:
1-Let the Put expire and you will be long 100 shares day after expiration.
2-Buy back the Put to close the trade.
3-Short 100 shares which will be removed from your account at expiration.
Naked Call Choices If ending ITM:
1-Let the Call expire and you will be short 100 shares day after expiration.
2-Buy back the Call to close the trade.
3-Buy 100 shares which will be removed from your account at expiration.
***Other choices but don't want to complicate it more.
"Naked" just means you have no stock position protecting it.
If you owned the stock and sold a Call then that would be a "covered call".
With an option position only, it's "naked".
...
***Other choices but don't want to complicate it more.
Too late, because my mind is already wondering about if the option is ATM or OTM. This is why I think you options people are nucking futs. You have too many options!
