I am interested if anyone has any knowledge or experience in stock calls/options.
It seems to be extrememly risky for the novice but something that lots of cash is made by the experienced.
Any info on how it works and how you go about it (Scottrade,broker,etc)
4 positions, buy/sell call, buy/sell put
The price of the option is determined by the volatility of the underlining stock, the volatility of the option, and how close it is to the expiration date.
If the call has expired and is not in the money than you have lost your investment in that position. You choose the expiration date and the amount of the option on the stock.
Whereas if a stock is against you, you can still hold it.
You can limit your downside at any time with the opposite option. You determine your downside. If you buy a call, than the only thing you can be out is the cost of the option. If you sell a call, most firms require you to own the stock also. If you sell a put, they require you to have the cash in your account to buy the stock.
I do options on a regular basis and I always limit my risk so I know exactly the worse case scenario how much I'm going to lose.
Options can be extremely safe and can boost a portfolio. The worse case scenario, you have to buy the stock for the underlining option.
thanks for the help guys.
With options can you end up owing more than your investment or do you only risk your original investment?
yes, its possible to owe more
Quote "If you sell options you can owe a LOT more." I disagree, you're going to have to give an example. You can buy the oppposite and limit your exposure to your investment. If you sell a call which they won't allow you to do unless you own the stock, and the person you sell the option to decides to exercise, you need to sell the stock to him but you are getting paid for the stock for the agree upon price so you haven't lost anything and you've gotten the income of the call. If you If you sell a put and it gets exercised, you buy the stock for the market price of the stock. Then you can immediately sell it and get your money back and you've gotten paid for the option.
Quote "buy options with leverage you can owe more." You don't owe any more than the cost of the option. If you buy 100 options at $4/option, total $400, and you give them only $200 to buy them, you still owe the other $200, and the option turns again you, you have to come up with the other $200. Still the same amount of money you were suppose to pay. Bought with leverage and you are not out anything more than if you paid for cash.
Quote "If you buy options with no leverage than your risk is limited to your initial investment." No different than buying with leverage.
there are places that allow naked options selling, granted not everyone will get their account approved to do it but it is possible.