Market question
- Thread starter bmc
- Start date
Because by definition, an "option" gives you the "right," but not the "obligation," to do something.... You paid for the right to buy (call) or sell (put) XXX.... If the price of XXX goes the way you think it will, you can exercise the option (i.e. exercise the "right" you paid for...). If it doesn't, you simply let the option expire and you're only out the price of the option. You can't place a stop-loss on a right, only on an obligation.... I hope that this helps? Let me know.
Dunno.
You can place a limit order ont an option position, but not a stop.
Seems like say you paid $2.00 for an option ($200 contract), it would make sense to be able to place a stop at say $1.00.
You can place a limit order ont an option position, but not a stop.
Seems like say you paid $2.00 for an option ($200 contract), it would make sense to be able to place a stop at say $1.00.
You can place a limit order, which would "limit" the price you purchased the option.... Once it's purchased, you can either sell it at a higher price, exercise it, or let it expire....
In your example, are you talking about a call option or a put option? If you bought a put option (the right to sell XXX @ $XX) at 2.00 and then the price of the underlying security (XXX) went down, then you would want to exercise your put option.... (i.e. you would want to sell the underlying security at the price locked in on your option contract and then turn around and buy the security back to cover at the lower price.)
If on the other hand, you purchased a call option (the right to buy XXX @ $XX) and the price of the underlying security went down, you would not exercise it because you can now buy XX cheaper in the open market than you could by exercising your option.... In this case, you would simply let the option expire. Does this make sense?
When you deal with "deratives" (which is what option contracts are), you should be careful.... If you'd like to ask specific questions, ask Jack for my e-mail addy.... Hope I've helped a little....
In your example, are you talking about a call option or a put option? If you bought a put option (the right to sell XXX @ $XX) at 2.00 and then the price of the underlying security (XXX) went down, then you would want to exercise your put option.... (i.e. you would want to sell the underlying security at the price locked in on your option contract and then turn around and buy the security back to cover at the lower price.)
If on the other hand, you purchased a call option (the right to buy XXX @ $XX) and the price of the underlying security went down, you would not exercise it because you can now buy XX cheaper in the open market than you could by exercising your option.... In this case, you would simply let the option expire. Does this make sense?
When you deal with "deratives" (which is what option contracts are), you should be careful.... If you'd like to ask specific questions, ask Jack for my e-mail addy.... Hope I've helped a little....
