Options for individual stocks

T

trader88a

I don't understand stock options.
The list price for some stock options for leap year or so high. why would anyone buy those options.
Some options have no volume and no speculator interest.
why do people even make market for these stock options.
you have option prices for out of money options priced at 25% of the strike price

ie stock is trading at $10 and leap year options for $5 is $1
the stock is techically 'worthless' bankrupt and still trading. and options are still traded but almost no speculator interest.
mostly option players doing these option stuff with little money in the game.
 
Your question is a bit hard to follow. It would be helpful if you provided the details of a position:

- stock price
- strike price
- put or call
- expiration date
- premium
 
Probably they are still quoted as traps to the unwary. No volume and no open interest means they aren't for traders. Millions play the lottery with no more chance than being struck by lightning, yet they still do it. Over and over...
 
trader88a said:
I don't understand stock options.
The list price for some stock options for leap year or so high. why would anyone buy those options.
Some options have no volume and no speculator interest.
why do people even make market for these stock options.
you have option prices for out of money options priced at 25% of the strike price

ie stock is trading at $10 and leap year options for $5 is $1
the stock is techically 'worthless' bankrupt and still trading. and options are still traded but almost no speculator interest.
mostly option players doing these option stuff with little money in the game.
More...
STop looking at junk stocks
 
Stock option prices are based to a large degree on the price of the underlying stock, time to expiration and other factors. Stock is an investment instrument that can be sold to another investor at any point in time. The option is a trading instrument and cannot be traded post the expiration date.
 
trader88a said:
he list price for some stock options for leap year or so high. why would anyone buy those options
More...

I assume this is a language barrier issue. A leap year is a year with an additional day in it.

I think you mean LEAPS. In this case, the reason to buy them is the same as the reason to buy any option. Insurance against a position. The longer dated the option, the more extrinsic value is built into the option. You can think of it as people wanting more money for taking on more risk to guarantee you a position that far out when volatility modeling can barely forecast the next few days accurately.

trader88a said:
the stock is techically 'worthless' bankrupt and still trading. and options are still traded but almost no speculator interest.
mostly option players doing these option stuff with little money in the game.
More...

There are big players trading LEAPS are they are a valuable instrument. MMs make markets on these options because, for example, a lot of people may want insurance on a portfolio heavily correlated with the S&P so they'd look to SPY/ES LEAPS for this.
 
trader88a said:
I don't understand stock options.
More...


Since you don't understand them then you may not understand answers. And you are using the word "speculator", which also shows that you may not understand options or answers if you think of people buying or selling options as "speculators".
In the future when you understand options you may understand how Mark Cuban used LEAP options to protect $billions after selling his company.
 
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For the investor, another use is buying high delta deep ITM call LEAPs as a surrogate for the stock, often called the "Stock Replacement Strategy". LEAPs have very little time decay early on. Assuming that the implied volatility is reasonable, you'll pay minimal time premium and that (plus the dividend, if any) is the amount that the call LEAP will lag outright ownership of the shares. If the underlying rises nicely, the call LEAP will have a higher ROI than owning the underlying.

To the downside, a call LEAP will lose somewhat less to far less if the underlying collapses. Below the strike price, the shareholder continues to lose whereas the LEAP owner loses nothing beyond the initial premium paid.

A LEAP advantage is that if the underlying rises nicely, you can roll it up, pulling money off the table and lowering the risk, something you can't do with long stock (unless you buy the synthetic put vertical). You'll give up some delta but you'll repatriate some principal. If price hasn't moved and you still want long exposure, roll the LEAP out so that you don't experience the high theta decay months nearer to expiration.
 
options have formulas and I don't understand how you can price these options. and still have speculators. the price for these options are 'irrational' for speculation purposes.
if you are bearish just do straight short. and long just buy the stock. the options are not worth it. and who would buy it.the premium is 10% for out of money options for calls. and depreciate in value
 
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