Options newbie here, could use some clarity

[Bazooka Joe]

Hello, what exactly is meant by this statement:
"The purchase of an option will be profitable if it's trade price is less than its value at expiration. The sale of an option will be profitable if it's trade price is greater than its value at expiration."

Thanks for the guidance.

 

[luckyputanski]

You have to sell at price higher than the price at which you bought to make profit. That's all it takes to be profitable!

 

[nazzdack]

----purchase of an option....
----profitable if....
----value at expiration.
----sale of an option....
----profitable if....
----value at expiration.
----guidance.

If you're going to hold an option trade until expiration, you will need sufficient & beneficial price movement to offset the loss of extrinsic value in the option, definitely so for a "long" and less so for a "short", in order to have a profitable trade.

 

[FXforex]

Hello, what exactly is meant by this statement:
"The purchase of an option will be profitable if it's trade price is less than its value at expiration. The sale of an option will be profitable if it's trade price is greater than its value at expiration."

Thanks for the guidance.

Very poorly worded, where did you find that?

Obviously you want to sell your options at a higher price than you bought them for. For Calls you want the stock to go up, for Puts you want the stock to go down.

 

[Bazooka Joe]

Very poorly worded, where did you find that?

Obviously you want to sell your options at a higher price than you bought them for. For Calls you want the stock to go up, for Puts you want the stock to go down.

Indeed it is poorly worded, chapter 2 page 13 of Natenberg's option volatility and pricing, 2nd edition.

 

[badnewsbear]

Hello, what exactly is meant by this statement:
"The purchase of an option will be profitable if it's trade price is less than its value at expiration. The sale of an option will be profitable if it's trade price is greater than its value at expiration."

Thanks for the guidance.

http://www.optionsprofitcalculator.com/calculator/long-call.html

^ is a good tool to use to get a better understanding of options. It can get buggy sometimes. 90% of the time it works.

 

[jimmyjazz]

Hello, what exactly is meant by this statement:
"The purchase of an option will be profitable if it's trade price is less than its value at expiration. The sale of an option will be profitable if it's trade price is greater than its value at expiration."

Buy low sell high => Buy low expire high.

Sell high buy low => Sell high expire low.