Trading stock options
I have an accounting background but am interested in trading options. I would appreciate help with this, as I'm not all that familiar.
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http://www.amazon.ca/Options-Futures-Other-Derivatives-John/dp/01314990…
what do u want us to answer. like everything we know about options and trading them? go buy john hull's book and read it. there very much of what you need to start trading in there.
Natenberg is better for purely options than Hull, which is more theory oriented on many kinds of derivatives. Most trading firms and desks that specialize in vanilla options (ie Option MM) are going to teach straight out of Natenberg, who is actually an instructor for new traders at one of the biggest prop shops.
+1
is trading stock options something which can be very lucrative?
Trading anything can be lucrative, it's all about what you enjoy.
Hello
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I have a simple question. Let's you have an options contract. And it's hits the strike price, and now you have the options to buy the stocks or not. If you do not buy the stocks, what happens to the money you invested in the options (assuming that you stock went the way you guessed it would go.) Thank you for help guys.
You pay a premium if you BUY an option contract - the premium is paid upfront. At option expiry, you exercise the option if it's in-the-money. However, exercising the option does not guarantee profit for your profit is computed by [Spot - (Strike + Premium)] for a call and [Strike - (Spot + Premium)] for a put.
That's as simple and layman as I can make it sound...
If you don't exercise you can either sell the contract back for its market value (the premium) or you can hold it until it becomes worthless at expiration and you lose what you invested (the premium) into the contract. Assuming the stock went your way (e.g. you bought a call and the stock appreciated) you could sell the option back to the market at what's probably an appreciated value. I say probably because your contract loses value as it approaches expiration.
CBOE has some good educational resources on options.
http://www.cboe.com/LearnCenter/default.aspx
What? I don't get your question.
You pay a premium to get your option so this money goes to the counterparty, whatever you decide to do about your option. Either you exercise the option and you get cash (or physical delivery) or you don't exercise and you lose the premium.
Most exchanges now have auto-exercise for anything in the money and that is what you would do since you'd otherwise be giving up the value that exists in the contract.
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