padib said:
Despite this example I still struggle to understand options.
A few questions:
- Where did you get the 1200 value (in bold) from? I see 1184 as a value in your table, did you round up?
- What happens to the seller when you buy the option but decide not to get the whole stock, especially if the stock value depreciates? Also, until when do you have to buy your guaranteed stock (if you want to), is there some date range until which you can't exercise your right to buy the stock at 6.50?
- Where did you get the 4000 values from?
Seems like you were right on all of these:
- PPHM seems to have had a spike in March of this year then back down, but since May 2013 it's up from 1.41 to 1.72.
- AMD seems to had already jolted when you recommended it, but still it went up from 4.07 to 4.53 overall since May 2013.
- SKUL also went up after having fallen abrupty in Aug before that (2012), so it was up 5.49 to 7.35 since your suggestion.
- ACTI went up up up from 14.94 to 22.75.
Very good suggestions prof.
|
The 1200 value is the 10 plus the 2 near the end of the table. That's how many options are available (12). Each option is worth 100 shares, so if you buy an option for .60 cents, you're actually paying 60$ for the right to sell 100 shares at the strike price (price in the middle).
If you decide not to exercise the option, the seller of the option keeps the "downpayment".
You can exercise the option at ANY time. However, there is an expiration date that it must be used by. In European markets, an option can only be exercised ON the expiry date.
So yeah, if I bought a call option to buy at 6$, and the stock only goes down from there, I never have to exercise the option, but he will keep my downpayment. But that's ok, because by doing so, I can basically own 100x the amount of stock that I'm capable of buying because each option is worth 100 shares.
For instance:
I have 100$
There are several companies that I want to buy stocks for, but I don't have the funds for all of them. Using options, I can buy the right to sell at the price I want in the future by simply exercising the option.
The 4000 value is the same as above. There are 40 options available on the calls, so 4000 shares available.
As far as current gaming recommendations, I would suggest parkervision $PRKR