put call
put call questions and answers
Learn about put call parity at the number one young investor website Teen Analyst.
Q: what does strike price mean in call and put options?
Hello, I am playing Cashflow 202 (a game about investing). I was wondering what does the strike price mean in a call and put option?
A: Buying an option gives you the right to purchase or sell the stock at the strike price.
Strike price of a call is the price at which you purchase the stock.
Strike price of a put is the price at which you sell the stock.
For example,
$45 call strike price (have the right to buy at $45)
$40 put strike price (have the right to sell at $40)
Q: Where can I view the put and call prices on the VIX?
Hi, I am wondering where I can view the current put and call prices on the VIX? Thanks for any help.
A: The quotes page at
http://www.cboe.com/DelayedQuote/QuoteTable.aspx
will display them. Use "vix" as the symbol.
Q: Where can i put a casting call for an independent film?
A friend of mine, along with another local director from broadcasting are planning to shoot a film and need actors. Its a short film with basically no budget but they need to compete in NY.
Where can I put a casting call or a way to reach people who might be interested?
I already used Myspace and Facebook. Any ideas?
Thanks
A: most small time actors choose www.craigslist.com for listings such as these. you can use the following guide to get there.
1> http://www.craigslist.org/about/sites
2>Select new york
3> select area that is most relevant
4>Under the word Gigs, select Talent
5> list your request
Q: How do you sell call and put options before having bought them?
I keep reading about how people set up these complex options spread scenarios like strangle and straddle etc where they are simultaneously buying and selling calls and puts. How can you sell a call or put option before buying it? ... or am I misunderstanding the whole thing altogether?
A: This is an insightful question, and no, you're not misunderstanding things.
Parties can sell puts and calls that are either covered or uncovered. The difference in risk between a covered and an uncovered position is enormous, and all brokers control the type of trading their clients are permitted to do so as to limit and control this risk. Please bear in mind that when assignments come in from the clearing corporations, it is the broker who must make good on each deal. The brokers therefore make sure that their options clients either have covered positions or else have plenty of experience to know what they are doing plus sufficient margin to cover their positions.
Selling covered puts: short puts can only be covered by an offsetting short position in the stock, although many - myself included - calculate whether the cash to cover a possible assignment is available instead of maintaining the short stock.
Selling uncovered puts: the cash-or-margin rule above is sufficient, although - please note - it may not be sufficient for the broker, who may require ultra-high margin or prevent the uncovered sale entirely.
Please remember that the total risk in a short put sale is limited to the strike price. Example: if a 30P is assigned, the assignee - the party who sold the put - pays $30 per share. This is the maximum amount he can lose if the company later goes bankrupt.
Turning now to selling calls, these can be either covered or uncovered. They are two entirely different animals in terms of risk.
Covered calls: these are covered in the client's account by actual shares of the underlying or deliverable. If the option is exercised, the broker sells the shares out of client's account and delivers them. Risk is low. This is a conservative strategy.
Uncovered calls: this is the highest-risk strategy of all and most clients are not permitted to sell these calls. Theoretically speaking, there is no amount of margin that would be sufficient, because there is no limit to how high the stock price could go. By expiration day an in-the-money call will be assigned and the stock will have to be purchased, at whatever price.
In reality, brokers do allow experienced clients with sufficient margin to sell uncovered calls. Even though there is no specific asset to back the uncovered call, nevertheless, the client's ability to manage the position can launch the sale. This client is called a level 4 trader.
Most of the complex strategies such as the strangles and straddles you mention, not to speak of butterflies and condors, are put on by level 4 traders.
It's the old story. One can't trade until one has the experience, and one can't get the experience until one trades.
What to do? If you're really serious, you can start with writing a covered call or two. Every broker will permit this. If your brokerage house gives live options seminars, perhaps you could attend these and become acquainted with the staff who give the presentations or who will at least be on hand. The next step - and it may take some time - will be to secure the broker's permission to do a calendar or diagonal spread in calls or puts.
If you've managed to read this far, you'll notice I haven't mentioned buying long calls or long puts. That's because countless studies show that the buyers of naked calls and puts are the parties who lose money. It is the sellers of the options who make money, because they are selling time value, which decays as the option nears expiration, and so they get to sell time value repeatedly.
And, in selling time value, the experienced traders segue into the complex strategies you mention, in order to hedge their own risks.
If you haven't visited www.888options.com, perhaps you'd like to consider this website which has excellent tutorials and educational resources. It's the clearing corporation, not a brokerage, has little or nothing to sell.
Try also cboe.com, the granddaddy of all option exchanges. The international exchange has a good educational section, and so does the Montreal exchange which you'll find at www.m-x.ca.
Options are tricky. It's a long learning process. Fun, though. Very good luck to you.
Q: Why is it dangerous to trade with the options put/call ratio, buying high interest puts when the ratio is high
and high interest calls when the ratio is low?
A: I would believe that the main risk associated with trading options when either ratio is high is that the volatility associated with the option tends to increase during these times which causes the option price to also increase.
With that said, if you make the wrong purchase, you can see your premium deteriorate pretty fast (depending on how much time you have to expiration).
The safest way to buy when these ratios are high, is to be a contrarian, and open a long term debit spread
Q: Where can I view a chart of put-to-call ratios for a stock or etf?
I'm interested in seeing the daily ratio of put to calls on an equity over time graphed on a chart in comparison to the equity's price.
How does actual put volume to call volume differ from open interest ratio of put to call?
A: http://www.schaeffersresearch.com/
Type in the ticker symbol and then click on the put/call ratio graph.
Just what the doctor ordered....
Q: How would you play a straddle on the Nasdaq Market without buying the put and the call on one stock symbol?
Scottrade only allows one put or one call per stock symbol. So if I want to play the Nasdaq in a straddle, I need to play two different stock symbols representing the Nasdaq. I was thinking NDAQ and QQQQ, with a put on one and a call on the other, say for February? What are your thoughts on this?
A: There is no need to use two different underlying issues.
You can create a synthetic long straddle two different ways.
(1) Buy 50 shares of QQQQ and buy 1 put option.
(2) Short 50 shares of QQQQ and buy 1 call option.
Either of these methods has the same risk/reward profile as a long straddle.
Q: What is the difference between a PUT and a CALL?
When investing what is the difference between a PUT and a CALL?
A: Puts and Calls are both option contracts that work differently for an investor/trader.
A put gives you the right to sell a certain number of shares of a stock at a particular price for a specified period of time.
A call gives you the right to purchase a certain number of shares of stock at a particular period of time.
These instruments can be used to lock in profits on stocks already owned, or can be purchased strictly for profit.
Q: Are there any risks whatsoever to a buyer of a long call or put option?
I have been led to believe that the writer is the only one who would ever have to surrender shares of a stock in options trading, that the buyer only loses his investment of premium in the call or put at the most. Is this true?
A: It is true, the buyer of the put or the call looses only his premium or value he paid for the option in case the stock remain 'remain out of the money'.
Q: Can someone simplify the concepts of "call" and "put" options?
I am studying for my Series 65 exam and am having a real challenge getting these two concepts clear in my mind. I undertand that these are two options used to "hedge" against price swings for a particular stock. You can buy or sell both, but when do you want to do each? For example, when would you want to sell a call? When would you buy a put? When would you buy a call? Sell a put? Also, please explain buying and selling long and short. Can you buy/sell a put, "short" or "long"? Why would you do this?
A: This is a complex subject. Basically, for every buyer, there must be a seller and vice versa. If you own the underlying stock, say 100 shares of HON and you paid $50 pershare for those 1000 shares. If you want to earn some extra income on HON and you think HON is in a lull, not going up or down, then you can sell 10 Calls (covered) of HON. When you sell the calls you get the premium for the sell. This will vary depending upon several factors, the length of the call, the volatility of the stock, the strike price you sell it at and how far out into the future you sell the call for.
If at the end of your call period, it is exercised because the stock went into the money, then you keep the premium, but you must sell the stock at a lower price than you could have otherwise.
Selling uncovered calls (naked) or selling puts is very risky and most brokers will require that you have extra funds to cover your exercised calls and puts.
That's it in a nutshell. I highly recommend that you read a book on this subject that is perhaps the clearest reading I have found on this subject. It's called "Getting Started in OPtions", by Michael C. Thomsett. I found it on eBay for about $5.00. Most authors want 10X that much for a book on this subject and will not provide as much insight.
Q: Put Call Parity? How does it figure for stock+put and Bond+call?
Assuming zero transaction charges, I have 2 positions:
1) actual Stock Holding and a Put
2) Bond Holding and a Call
If we look at the payoff diagram, then the returns are exactly the same. But from the liability point of view, the 1st position is still risky as compared to the second one.
Could someone please explain how??
Thanks
A: Put/Call parity for European style options states that the PAYOFF of holding either the fiduciary call (call + bond) or protective put (stock + put) MUST be equal. Holding either position will NOT be risk free but merely a hedge in case of an adverse price movement in the underlying asset however, both positions will carry the same amount of risk. Arbitrage theory holds that So+Po=Co+(x/1+r) where So= the asset, Po= the put, Co= the call and x= a pure discount risk less bond paying the exercise price at the option's expiration.
Q: What is call and put option? and going long and short on an option?
can someone explain me what is call and put option and going short or long on an option in laymans term .. in an elementary term.i am having trouble undertanding about it from the web
A: O.K. try this. Buy a call option: You hope the stock goes up in price. I.E. Stock is at $5.00 you pay a buck to me (the seller of the call option you want to buy) to buy it at seven dollars. Lets say that stock goes up to ten dollars. You now have the right to buy that stock from me at seven dollars and can sell it right away at 10. You profit would be $3 a share and you never even needed to buy the stock. Technically $2 because you paid me a buck for the call option. So, the cool part is obvious. You made money on a stock that you never even had to buy. You just had to pay a buck for the right to buy it at a certain price and keep your fingers crossed that it goes up. If it doesn't.... big deal, you lost a buck. No biggie. A put option: You hope the stock goes down. EXACT SAME PRINCIPAL except you are going to make money if you buy a put option and that stock falls in value. I remember it this way. You call somebody "UP" or you "PUT" somebody down. Remember, buy a call (hope stock goes up) buy a put (hope stock goes down). Last part: When you short an option it simply means YOU SOLD the option to someone else. When you are long and option is just mean YOU BOUGHT the option. A fancy way to say whether your bought the option from someone, or sold the option to someone. Hope this helps!
Q: Why would you want to buy a put or a call?
Why would you want to buy a put or a call? Suppose you thought Apple's new I-Phone would be a huge boom for Apple, would you buy a put or a call on the stock? In order to answer this question, take a look at what Apple (trading symbol AAPL) is selling at right now and what it's puts and calls are selling for. With derivatives likes puts and calls, can an investor stand to make a lot of money with a minimal cash investment? Why? What about if he/she guesses wrong, do they loss a lot of money?
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Q: Why put Call of Duty 4 on the DS but not the Wii?
The game Call of Duty 4 is on the DS I saw it in EB games but there isn't a Wii version now why is that.
A: Because Nintendo cant just keep making great games for the Wii. and leave out the DS...
Anyway it will have crappy graphics on the DS.