Stock Options and Futures

There are many different options for each stock.

Usually a website that gives you a stock quote will give you an option quote also. Then you can see the different available options for that stock.

See related links for more info on Stock Options

A put has limited upside and acts as insurance on the underlying. The most you can make by buying (being long the put) is the strike price less the premium. You may have bought for any number of reasons: to speculate on a downward movement, to insure a long position, or to hedge an option written at a higher strike (vertical spread), or to hedge an option written at a different date (calendar spread).

On the sell side, you may be using your cash to generate income. You may be desiring to go long the underlying but only under a price you deem fair. You may be closing out a hedge before it expires worthless, or putting on any number of trades that involve multiple options and different risk/reward charts.

I'm sure I haven't covered all the possibilities here; but this should give you some ideas. BTW, the answers for call options will be similar due to put-call parity. However, calls have theoretically unlimited upside if the underlying increases in price.

It's called insider trading. It is HIGHLY illegal.

It is easier to use an example than it would be to explain. Let's say you are short 1 XYZ June 100 put. In other words, you have given another investor the right to sell you 100 shares of XYZ stock at 100 dollars a share, no matter what price the stock is trading on the open market. If the stock is trading @ 105, no one would "put" the stock to you because they would be losing 5 dollars a share compared to selling at the current price.

Say XYZ stock splits 2 for 1. It goes from 105.00 a share to 52.50 and every share is now worth 2 shares. It would seem that putting the stock to you @ 100 dollars would now be a huge money maker, but it is not. The put also splits 2 for 1. You would then be short 2 June 50 puts, giving someone the right to put 200 shares @ 50 dollars a share into your hands.

The math is fairly simple in a 2 for 1. As you can see, if your put gets exercised against you in either instance, the stock is sold to you for 10,000 dollars total (100 shares @ 100 dollars per, or 200 shares @ 50 dollars per). It gets much more complicated if it is a 3 for 2 or other uneven split. In those instances, an entirely new option class is created and both are traded until all the "old" XYZ options have expired.

The NSE is India's largest and the worlds third largest stock exchange in terms of Transaction volumes & amounts. The NSE is based out of Bombay. The NSE has set up its trading platform as a nation-wide, fully automated screen based system. This enables anyone in any part of the country to trade on shares listed in the NSE.

The NSE is based on a demutualized model wherein the ownership, management & trading rights are managed by three different group of people. This is to ensure that there is no conflict of interest among the stake holders.

NSE Index or NIFTY:

The NSE Index or the Nifty Index as it is popularly known, is the index of the performance of the 50 largest & most profitable, popular companies listed in the index. Each company that is part of the index has its own weightage in the value of the Index. The value of the Nifty Index is the weighted average of the prices of these 50 companies.

No, just the opposite. It decreases the value.

Options have two "Prices" associated with the financial instrument. STRIKE PRICE and PREMIUM PRICE. When you use the term "Excercise Price" you are referring to the "STRIKE PRICE."

A CALL option is the right to BUY a specific instrument at a specific price. So having the "RIGHT TO BUY LOWER" is always worth more than the right to buy higher.

To clarify, if your company offers you 3,000 options at an excercise price of $2, those are worth vastly less than the same options with an excercise price of ZERO. Here's why:

An options "Value" is known as the Option Premium (OP). OP is what the option is worth.

Time Value + Intrinsic Value = Option Premium

So if the market value of ABC Company is $5 and your options strike price is $0 you can cash those in for $5 a share right now.

However, if your Option Strike Price is $4 in the same market (ABC stock price is $5) then you only get a dollar on exercision.

Who gets the other $4? The company.

- - - - -

"Higher exercise price" (traders would say "higher strike price") means nothing in and of itself. The big question is, what is the difference between the strike price and the stock price at the time you bought the call? Or, in trader's lingo, how far out of the money is the option?

People who sell ("write") options are gambling, and the thing they are most hoping for is the price of the stock staying below the strike price. If this happens the option expires worthless and the writer keeps the premium. That's the ideal.

The closer the two numbers are, the more likely the option will be exercised and, therefore, the more likely you're going to have to cough up either cash or stock. SO...the more likely the option is to be exercised, the more expensive it will be.

Let's take two options priced at $340.50 per share. That is a ton of money so obviously the premium should be pretty low, right? Not if you're buying calls on Apple--$340.50 was the Friday, May 13 closing price so this call would be at-the-money and therefore very expensive. As in 10 percent, or more, expensive.

OTOH, if you were buying $340.50 Caterpillar calls, assuming anyone would sell you a $300-plus call on a $106 stock, you could get into those for about a quarter per share.

The best way is to build a "paper portfolio." This is a scholastic exercise in which you create a pretend account, buy stocks with a fixed amount of money, and track how they perform. Once you can consistently make a pretend profit in your paper portfolio, you're ready to invest real money in real stocks.

When you do invest money, I would start with companies that are in industries you already know about. Build a paper portfolio with those companies; choose a few that perform well and invest in them.

A great website you can practice this would be on www.updown.com.

The first thing you do is get a job in a store that sells expensive stuff and pays on commission. This will let you know if you have a passion for selling when you're not sure if you're going to make any money today.

Next, go to college and get your MBA.

Then take and pass the Series 7 and Series 63 securities examinations, and become registered with the Financial Industry Regulatory Authority.

Once you have this, get a job with a brokerage as a cold caller. If you want to know what that is, get a copy of "Wall Street" and look at what Bud Fox is doing before he hooks up with Gordon Gekko.

Call options give you the right to buy a stock at a specific fixed price no matter how high the stock rises to in future. Traders normally buy call options when they expect the stock to rise.

Put options give you the right to SELL a stock at a specific fixed price no matter how low the stock drops to in future. As such, traders normally buy put options when they expect the stock to fall.

Read the links below for more details.

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There's one main difference and it's huge: An option contract gives the person who buys it the privilege of doing whatever it is the contract is written for. A futures contract imposes an obligation on the buyer. There are also liquidity requirements and requirements to pay performance bonds in futures trading that don't exist in options trading, but the real basic difference is that an options buyer can do something and a futures trader has to.

Call options allow you to always buy the underlying stock at its strike price before expiration no matter what price the stock is in future and is therefore bought when the underlying stock is expected to go UP.

Put options allow you to always sell the underlying stock at its strike price before expiration no matter what price the stock is in future and is therefore bought when the underlying stock is expected to go DOWN.

As such, which one has greater potential depends on the prevailing market condition and your general outlook on the trend of the underlying stock. Generally, call options would have more appreciation potential in a bull market and put options would have more appreciation potential in a bear market.

Dividends don't play into call options.

If you sell a covered call and it expires worthless, you'll receive any dividends from the stock because you still own the stock. If it's exercised, the new owner receives them because the stock is hers now.

The money that changes hands when you sell a call is the "premium," and the person who sells the call gets that.

Buy it Now or BIN is the option to bypass the auction period and simply purchase the item for sale. BIN ends the auction and you get the item.

Stock options are options on stocks and is a form of Financial INSTRUMENT.

Insider trading is trading conducted by company insiders such as directors and is a form of Trading METHOD.

So, one is a thing and the other, a method. So there really isn't any relationship.

A call option allows its purchaser to buy ("call in") stocks at a certain price on a certain date--say, 100 shares of Walmart for $50 on November 1. A put option allows its purchaser to sell ("put") stocks on a certain price for a certain date. The seller of the option has to buy them (in a put) or sell them (in a call) if the option is exercised.

When you buy a stock, you are buying a small piece of ownership in the company.

Not answer by just any contributor. This answer was answered by me.-.

-Serena

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Underwriters are the institutions/individuals who agree to buy the shares of the company in case the company is unable to sell all its shares to the public. For providing this safety, the underwriters charge a commission to the company for providing this service.

London Metals Exchange futures contracts are written for a bundle of lead ingots. There are 42 ingots in it, and it weighs 1000 kilograms, or 2200 pounds.

Not necessarily.

On the date you exercise the option, you need to record the difference between what you paid for the stock by exercising your options and the fair market value of the stock when you bought it. That's used for calculating your alternative minimum tax if you hold the stock over a year, but it's not used for calculating ordinary income tax.

Depending on how big a spread there is and how much stock you got, this could be a nontaxable thing or it could really whack you.

cool

Well, the first difference is the root difference between a futures contract and an option contract: in a futures contract you MUST complete the sale at the end of the contract (if you didn't buy it back before the settlement date) but in an option you CAN.

Once we're past that, the short position in a futures contract--the person who has the item the contract is derived from, such as a thousand bushels of wheat--is the same as the buyer of a put. Both of them have the thing now, and will transfer title to it after settlement or exercise.

"Definitions For The Fifth Letter Of Ticker Symbols

Have you ever wondered what that fifth letter at the end of the stock symbol is? It signifies that the issuer may have additional circumstances involved with the stock. Most recognizable is the infamous "E".

Complete "Letter" list enclosed below. You may want to print it out for your own reference.

The Eligibility Rule protects investors by ensuring that they have access to companies current financial information when considering investments in OTCBB-eligible securities.

Nasdaq will continue to monitor the filing status of all OTCBB issuers. In the event of a filing delinquency, Nasdaq will append the trading symbol(s) of the delinquent issuer's security with an "E". The fifth character "E" will be removed from the symbol once Nasdaq receives notification that the security meets the requirements of the Eligibility Rule. After 30 days (60 days for non-SEC filers), if Nasdaq has not been notified that the appropriate filing has been made with the issuer's regulatory authority, the issuer's security will be removed from the OTCBB.

Code: Meaning

A: Class A.

B: Class B.

C: Exempt from Nasdaq listing requirements for a limited period of time.

D: A new issue of an existing stock. (Often the result of a reverse split.)

E: Delinquent in required filings with the SEC as determined by the NASD.

F: Foreign.

G: First Convertible Bond.

H: Second Convertible Bond, same company.

I: Third Convertible Bond, same company.

J: Voting.

K Non-voting.

L: Miscellaneous situations such as foreign preferred, preferred when-issued, a second class of units, a third class of warrants, or a sixth class of preferred stock.

M: Fourth preferred, same company.

N: Third preferred, same company.

O: Second preferred, same company.

P: First preferred.

Q: In bankruptcy proceedings.

R: Rights.

S: Beneficial interest.

T: With warrants or with rights.

U: Units.

V: When-issued and when-distributed.

W: Warrants.

X: Mutual Fund.

Y: ADR (American Depositary Receipts).

Z: Miscellaneous situations such as a second class of warrants, a fifth class of preferred stock, a stub, a foreign preferred when-issued, or any unit, receipt, or certificate representing a limited partnership interest."