Showing posts with the label call-and-put-options-examples

Long-Term Options- Introduction

Long-Term Options Introduction Instead, the purpose of this is to highlight the fact that option  premiums in general do not reflect the expected long-term growth rate of the underlying  equities and to explain an investment strategy that can be used to take maximum  advantage of this phenomenon.  As I mentioned before, my own interest in this subject stems from the fact that I could no  longer contribute additional funds to my retirement plan. As a long-term investor in the  market, I had assembled a stock portfolio over many years, and I simply did not wish to  raise cash by selling any of my winners. My few losers and laggards had long since been  disposed of and the proceeds used to buy more shares of my better-performing stocks.  I'm not a short-term, in-and-out investor, but I wanted to keep buying. Options seemed the way to go, but as with stocks, purchasing calls requires money.  What's more, options can only be paid for in cash, so going on margin and


THE OPTIONS COURSE LONG CALL In the long call strategy, you are purchasing the right, but not the obliga tion, to buy the underlying shares at a specific price until the expiration  date. This strategy is used when you anticipate an increase in the price of  the underlying stock. A long call strategy offers unlimited profit potential  with limited downside risk. It is often used to get high leverage on an  underlying security that you expect to increase in price. When the underlying security price rises, you make money;  when it falls, you lose money. This strategy provides unlimited profit po tential with limited risk. It is often used to get high leverage on an underly ing security that you expect to increase in price. Zero margin borrowing is  allowed. That means that you don’t have to hold any margin in your ac count to place the trade. You pay a premium (cost of the call), and this  expenditure is your maximum risk. Perhaps the only drawback is that opt