When is buying calls better than buying shares?

Let me make sure I understand.

There is a point at which options get more valuable if price gets there on or before expiration, yes?

So if MNMD gets only to $3.00 you would make money with shares but if it's not there quick enough and doesn't get to $3 until the ending day of the option then you lose money.

Yet there is a section at which options will be worth more no matter what yeah?
 
7out said:
Options are riskier than outright stock. Just imagine you are wrong and stock only doubles to $2.50 by Jan 2024. By owning stock, you still have the value of money in shares and have actually doubled your investment. On the other hand if you bought call options expiring in Jan 2024 and price is only $2.50 at expiry, you have nothing plus you lost your investment.

Options are usually good if you know how to time the market (like sex, most men overrate their skills). As a beginner (you) I'd suggest you're better off using $500 to buy shares @$1.12 and selling Jan 2024 call options @ $0.56. That way you can get almost 1000 shares at a net cost of just $0.56. And if you're right and stock goes to $2.50 or higher you'll make 4x(plus) your money. The good thing is if you're wrong and stock doesn't move much, you won't lose your money and actually make some profit from option time value decay.
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Man you're saying buy $500 worth and then sell as many calls as I can and then buy more shares with the profits?

So I'd have 446 shares for $500, then I'd sell 4 calls ($224) then I'd buy another 200 shares? Yet my original 400 would be limited to $2.50 maximum price, but the other 200 would be fine because they're not bound by exercising?

Or are you saying buy 446, sell 4 calls, buy 200 shares, sell 2 more calls, buy 100 more shares, sell 1 more call? That sounds awesome.

But if price goes far I'd be limiting my gains AND if price gains I'm basically stuck with these shares for 2 years.
 
Yes,Of course..Are you familar with the basic greeks?


IronFist said:
Let me make sure I understand.

There is a point at which options get more valuable if price gets there on or before expiration, yes?

So if MNMD gets only to $3.00 you would make money with shares but if it's not there quick enough and doesn't get to $3 until the ending day of the option then you lose money.

Yet there is a section at which options will be worth more no matter what yeah?
More...
 
taowave said:
Hmmmm..Not really...What about a stock that goes up 3 percent a day,every day for 30 days...Thats low RV,but a thing of beauty if you are a call buyer playing direction

Delta hedging is another story,and you are basically correct in that approach...
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thats realized vol on a different time frame.
 
IronFist said:
Man you're saying buy $500 worth and then sell as many calls as I can and then buy more shares with the profits?

So I'd have 446 shares for $500, then I'd sell 4 calls ($224) then I'd buy another 200 shares? Yet my original 400 would be limited to $2.50 maximum price, but the other 200 would be fine because they're not bound by exercising?

Or are you saying buy 446, sell 4 calls, buy 200 shares, sell 2 more calls, buy 100 more shares, sell 1 more call? That sounds awesome.

But if price goes far I'd be limiting my gains AND if price gains I'm basically stuck with these shares for 2 years.
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It's all about ROI (return on investment). You stand a much better chance of profit, by buying as many shares with your $500 after selling calls. You drop your net purchase price to $0.56 a share. If it goes to $2.50 you've made $1750 or so in profit. If you decide to buy $2.50 calls you'll need stock to appreciate to the high $4's just to get a similar return. Which sounds riskier to you?

On another note, if you sell the calls at $0.56 and they expire worthless, you've also reduced cost of shares down to $0.56. Now you have a lifetime option on these same shares.

PS, I own a few 1000's shares of MNMD. It's a lottery like weed stocks such as ACB. It might shoot up upon regulation, but the long term looks weak and more likely to fail than succeed.

Treat it like a pharmaceutical, prepare to lose more often. keep it a small % of your portfolio.
 
If i read you correctly,you are reccomending selling the MNMD 1/24 2.50 put and getting a bit larger ??

I wouldnt cap the upside on that PIG,but if i did,I think the 2.5 are the wrong strike to sell..Stock has nade several 100% to 500% moves..Why cap it "so tight"

Ild sell the 7.5 strike at .25.....
































7out said:
Options are riskier than outright stock. Just imagine you are wrong and stock only doubles to $2.50 by Jan 2024. By owning stock, you still have the value of money in shares and have actually doubled your investment. On the other hand if you bought call options expiring in Jan 2024 and price is only $2.50 at expiry, you have nothing plus you lost your investment.

Options are usually good if you know how to time the market (like sex, most men overrate their skills). As a beginner (you) I'd suggest you're better off using $500 to buy shares @$1.12 and selling Jan 2024 call options @ $0.56. That way you can get almost 1000 shares at a net cost of just $0.56. And if you're right and stock goes to $2.50 or higher you'll make 4x(plus) your money. The good thing is if you're wrong and stock doesn't move much, you won't lose your money and actually make some profit from option time value decay.
More...
 
Last edited:
When is buying calls better than buying shares?

-When you are absolutely certain that a HUGE uptrend move is going to happen by a specific time that no one knows or only very few people know about
 
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