ratherbealurker

ratherbealurker t1_jacd5id wrote

Reply to comment by cshaiku in ELI5 - What are calls/puts in stock trading, and how are returns calculated when they are executed? by burman07

Not really although you can use them in so many different ways. Here’s how I’ve used them, it’s been years since I’ve traded options because I’m heavily restricted at work, but in the past I’ve used these simple strategies.

Also first keep in mind that you don’t have to exercise an option that’s in the money (meaning profitable) you can just sell it.

Many times I owned a stock and just wanted to play swings without buying and selling it so:

Buy a call: I own ACME and it’s at $10 so I think it’s going to go up. I buy a call option that expires in a month or so with a strike price of 10 or 10.25. Then if it goes up to 12 I sell that option. I didn’t really want the shares so i did not exercise the option, just sold it for the profit.

Buy a put. I own ACME and I though it was going to dip. So it’s $15 and I buy a put option at a strike price of $15 or $14.50. If it drops then I sell that put. I want to keep my shares so I don’t exercise.

Selling them is opposite. When I bought calls I was betting it was going to go up. So sometimes I’d think that ACME was going to go down so I wrote and sold a call option. It’s at $10 so I sell a call and it goes down, that person that bought that call option with a strike around $10 is now holding a worthless contract since it’s now at $8. Why exercise and buy from me when it’s cheaper on the market? I pocket the money from selling the contract and it expires worthless. And if it did go up, well I still made profit on my shares just not as much as I could have.

Sell a put, I think it’ll go up so like the call sell I write the contract and take the money and it expires worthless. Why sell to me when you can sell to the market same price?

Very simplified and it gets deeper than that. Look up option strategies, like straddles.

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ratherbealurker t1_jabnli0 wrote

Reply to ELI5 - What are calls/puts in stock trading, and how are returns calculated when they are executed? by burman07

If you want to remember the difference when buying a call or put, just remember:

A call is the option to pick up the phone and order the stock (buy) at the strike price.

A put is the option to put the stock into the market (sell) at the strike price.

Think it’ll go up, use a call. Think it’ll go down, use a put.

Gets more complicated in reality and you can also sell contracts.

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ratherbealurker t1_iya8tvp wrote

Reply to comment by Gonzostewie in So it’s not real wood, cool. by DickButkisses

I have put together furniture where the directions make no sense and it’s not intuitive on how it goes together.

Things like the drawings in the directions showing the pieces in impossible orientations and pieces too similar to easily figure it out.

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