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Investment Advice for Squilly
- Thread starter ucfgrad93
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You have my attention
Good.
I believe this will happen as well. That said, there are no guarantees that it will.
Winner, winner chicken dinner.
Now, don't get me wrong, there is a huge potential to lose big in options. However, using just one type of option has made me a ton of money with low risk.
Good.
I believe this will happen as well. That said, there are no guarantees that it will.
Winner, winner chicken dinner.
Now, don't get me wrong, there is a huge potential to lose big in options. However, using just one type of option has made me a ton of money with low risk.
Options... Like currency options?
No, stock options.
First, let me say that I'm not a financial advisor. As with all investments there is a risk of losing money. And as I've said earlier, there are many different types of options and some of them are very high risk. I've lost money on various types of options but not on what I want to share with you.
The type of option I'm talking about is a covered call option. In a nutshell, it you are making an agreement to sell a stock that you currently own at a future date at a set price. You will earn a premium or fee that is yours to keep even if you don't sell them your stock.
Does this sound interesting to you?
Squilly, having read all your threads in detail, I think you should stay away from options and other derivatives.
Just my humble opinion; proceed as you see fit.
Just my humble opinion; proceed as you see fit.
You said the same about me and stocks.
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I think a coworker of mine was talking about that. Is that when you buy a stock for say $100 and someone offers to buy it for $105 then it can go up to $110 so you both make money? Downside is it can drop to $95 or lower and you lose money or break even?
For someone who admits to having difficulty with undergraduate mathematics, I do not think it wise to get into these complex instruments. That's all I'll say. Do what you will, buddy.
Ok, so lets get some vocabulary out of the way.
covered call is an option sold against a stock that you currently own. It is an agreement to sell your stock at a future date for a set price.
strike price is the selling price of a stock that is set by the seller of the covered call.
expiration date is the date that the option to buy the shares ends or expires.
contract is an option to buy or sell 100 shares of stock.
premium is the fee someone pays you when they buy your covered call. It is yours to keep regardless of whether or not your stock is sold.
covered call is an option sold against a stock that you currently own. It is an agreement to sell your stock at a future date for a set price.
strike price is the selling price of a stock that is set by the seller of the covered call.
expiration date is the date that the option to buy the shares ends or expires.
contract is an option to buy or sell 100 shares of stock.
premium is the fee someone pays you when they buy your covered call. It is yours to keep regardless of whether or not your stock is sold.
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Sounds to me like any other stock buy, buying at a certain price with added benefits.
That is fairly close. So here is the deal.
Lets say you own 100 shares of Apple that you purchased for $100/share. Now lets say you sell 1 covered call contract at a strike price of $105 and an expiration date of June 17. (Remember, 1 options contract is for 100 shares of stock.) The buyer of the covered call will pay you a fee or premium. Lets say, that the premium is $1/share. When you sell the covered call, you will get $100.
If the stock price is at or above the strike price of $105 on June 17th, your shares will be sold at that price. You will no longer own them and you will have made $5/share capital gains in addition to the $100 premium for selling the covered call.
If the stock price is below the strike price on the expiration date of June 17th, then the covered call that you wrote expires. You keep your stock and you keep the premium of $100.
Any questions?
Squilly, why not buy a book about investing and teach yourself instead. There's something to be said for putting your own effort and time into learning instead of having the members here do your leg work.
Like I said earlier, I don't mind sharing this as someone once took the time and shared it with me.
True, but the same token he seems to be taking the easy route out and not willing to put the effort in himself.
Basically he wants the information spoon fed to him, regardless if its investments, or business or even about car spoilers.
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I'm also quite amazed at the level of patience you've exhibited while providing some very detailed and insightful information
True, but the same token he seems to be taking the easy route out and not willing to put the effort in himself.
Basically he wants the information spoon fed to him, regardless if its investments, or business or even about car spoilers.
Edit:
I'm also quite amazed at the level of patience you've exhibited while providing some very detailed and insightful information
Personally, I think Squilly has entertained this forum so much that people want to repay him.
He offered to help. I know some about stocks, this is just extra gained knowledge. Isn't that what a forum is for, discussion?
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I don't know if that's a good thing.
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True, but the same token he seems to be taking the easy route out and not willing to put the effort in himself.
Basically he wants the information spoon fed to him, regardless if its investments, or business or even about car spoilers.
Edit:
I'm also quite amazed at the level of patience you've exhibited while providing some very detailed and insightful information
I don't like being spoon fed. Like he said he's essentially returning a favor from when someone else taught him. I'd do the same.
Well, that could go either way. Sometimes I really question of you're making stuff up for entertainment value or are you just lucky enough to fall into some messed up stuff.
Truthfully, I haven't made up one of my threads. I wouldn't consider myself lucky in most of the situations but do consider myself lucky to be surrounded by people that are entertained by it and help, whether they think I'm trolin or not.
Now the downsides to this strategy...
1. Taxes. This can turn a lot of short term capital gains. I do this in my IRA account so it doesn't affect me. However, it might create more taxes for you.
2. Not remembering that 1 contract = 100 shares of stock. In my example above, if you accidentally sell 100 contracts for your 100 shares of stock it could lead to huge problems. Lets say you did that and the option exercised (which means the stock reached its strike price) then you would be obligated to deliver 10,000 shares even though you only have 100.
3. Setting the strike price below your purchase price. If you do this and your option gets exercised then you will lose money on the sale of your stock.
4. You could lose out on some upside potential. In my example above you sold an Apple covered call with a strike price of $105 and on June 17 if the stock price was $150, you miss out on $45/share of capital gains because you are obligated to sell at $105.
I misread that at first, and thought it said "people want to spay him". I was laughing so hard it took me a couple minutes till I realized that wasn't it. I think I need more tea.
I'm also quite amazed at the level of patience you've exhibited while providing some very detailed and insightful information
Thanks. I am a teacher by trade.
That explains it. I apologize on every idiot you came across from my generation, I mean it
Very well done, ucfgrad; these are very interesting posts (and I have learned a few things, too, such as the precise meaning of some of the terms used in this environment).
Your patience, generosity in sharing your knowledge, your evident gifts for concise explanation and explication and your clear desire to share what you know about this all makes you an absolute credit to the profession of teaching. Your students are very fortunate - and I write this as someone who graced a classroom for the best part of two decades.
Which level of teaching?
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That makes sense too. It's exactly what my coworker told me today and a couple days ago.
Thank you for your kind words. I really appreciate them.
I taught middle school (7th & 8th grade) for over 10 years.