## Stock calls for dummies

Assume that you think XYZ stock in the above figure is going to trade above \$30 per share by the expiration date, the third Friday of the month. So you buy a \$30 call option for \$2, with a value of \$200, plus commission, plus any other required fees. Call options usually rise in price when the underlying asset rises in price. When you buy a call option, you put up the option premium for the right to exercise an option to buy the underlying asset before the call option expires. When you exercise a call, you’re buying the underlying stock or asset at

Traders can write covered calls against stocks they already own. Writing covered calls can be an easy and effective part of an beginner's options strategy. An option is a contract giving the buyer the right to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date. Conversely, in the put option, the investor expects the stock price to fall down. Both options can be In the Money or Out of the Money. In the case of the call option  1 Sep 2019 We can protect ourselves somewhat by selling (finance folks call the act of selling options “writing”) call options against our Apple stock position

## So you decide to buy an August 30 put for a \$1 premium, which costs you \$100. By buying the put, you’re locking in the value of your stock at \$30 per share until the expiration date on the third Friday in August. If the stock price falls to \$20 per share, you still can sell it to someone at \$30 per share,

If Apple stock improves in value it may be is \$160 on the strike date. If you have a call option you can buy the Apple stocks at \$150 and sell them at \$160 for a profit of \$10/share x 100 shares = \$1,000. So, if you believe Apple stock with dip to \$140 by the strike date, you will take a put option for \$150. If the stock stays under \$280, he just pocketed \$12, 4.6% of the stock value, in just 3 months. This is why call writing can be a decent strategy for some investors. Especially if the market goes down, you can think of it as the investor lowering his cost by that \$12. A call is the option to buy the underlying stock at a predetermined price (the strike price) by a predetermined date (the expiry). The buyer of a call has the right to buy shares at the strike price until expiry. The seller of the call (also known as the call "writer") is the one with the obligation. Selling naked put options is similar to buying a call option, because you make money when the underlying stock goes up in price. Selling naked puts means you’re selling a put option without being short the stock, and in the process, you’re hoping that the stock goes nowhere or rises, which enables you to keep the premium without being assigned. If you buy a stock when the company isn’t making a profit, you’re not investing — you’re speculating. A stock (or stocks in general) should never be 100 percent of your assets. In some cases (such as a severe bear market), stocks aren’t a good investment at all.

### Call and put options are examples of stock derivatives - their value is derived from the value of the underlying stock. For example, a call option goes up in price

8 May 2018 The Foolish approach to options trading with calls, puts, and how to better A call is the option to buy the underlying stock at a predetermined