Put Call Question.........................
ZMan is almost right -- you would also have to buy a bond. Put-Call Parity is: S+P=PV(K)+C where: S is the stock P is the price of a European put with strike price K C is the price of a European call with strike price K PV(K) is the present value of K that matures on the expiration date of the two options. A little algebra shows that: S = PV(K)+C-P So, you need to go long a K dollar zero coupon bond, long a call option and short a put option.
What is a "contra" call option?
I believe that is a concept used in Singapore. Contra is the buying or selling of stocks without having to pay for the cost of the stocks. Once you buy the stocks on contra, you will have to sell the stocks after a period of time. At the end of that period, you will have to pay for the difference between your initial buying price and selling price. Currently, the period of time offered by the local brokerages to settle your payment and pay for the difference between the initial buying and selling price is 3 days although the period of time can be extended depending on your relationship with your broker, credit record and the frequencies of trades that you carried on with the brokerage.
What does a B/A size of "300X1000" on a call option mean? I have never actually purchased an options contract
- I want to purchase some call options, and I know what an option is (once it hits the strike price, it is in the money, and I can buy the stock and then cash it in), but I am having trouble understanding the terminology when I am trying to purchase stock options at my online trading account. (ie "B/A size"). If anyone has experience buying these, please drop me some advice! (I don't want to get stuck with a contract that says I have to purchase 30000 shares or something to exercise the option)
Call and put options?
So I've never used options before when trading stocks and I know it can be very lucrative if you play the right stocks... however I do not know anything about it really, I have a general concept from what I've read on the internet but that's about it. So I have a few questions to try to grasp how options work a little better. I'm going to try to use some examples of what it looks like to me, Would this be short selling? So say stock XYZ is currently trading at 23.45 per share - so I buy at 23.45 on Feb 15 I think its going to drop to $23.00 (strike price) per share (-0.45 cent difference) by Feb 25 I buy 2 "books" with 100 contracts each, and it does drop at or below 23.00 sometime between Feb 15 - Feb 25 (I would have essentially made 90.00 minus brokerage commissions). Does that sound about right? Also, what would happen if It went up to say $25 a share and never went below $23 in that time? How would I exactly lose money in this deal? Would I be forced to buy 200 shares of XYZ at $25 a share then? or would I just lose the difference from $23.45 to $25 so roughly $1.55 per contract x 200? I'm sorry its kind of a long questions but I would really like to understand more about this... 5 stars to anyone who can answer all my questions. Thank you in advance!
What is the payoff for an investor with these combinations of options?
1.Let S(t) be the price of a given security at time t. All of the following options have exercise time t and (unless stated otherwise) exercise price K. Give the payoff at time t that is earned by an investor who (a)owns one call option and one put option. (b)owns one call having an exercise price K1 and has sold one put having exercise price K2 (c) owns two calls and has sold short one share of the security (d) owns one share of the security and has sold one call