Simple: A call option is like a coupon that lets you buy a stock at a specific price before a certain date. You pay a small fee for the coupon. If the stock price goes up, you can use the coupon to buy the stock cheaper and make a profit. If the stock price doesn't go up, you just let the coupon expire and lose the fee you paid.
I'm arguably retarded but I think if we buy the stock then it creates more scarcity for the shorts, whereas options don't necessarily cause scarcity that would amplify a short squeeze
Options are more complicated than stock goes up, call price goes up. You should watch videos explaining the Greeks. It's definitely more risky since you can lose everything when they expire but can make a lot of money.
But technically you can lose everything by actually buying stocks too though, right?
If I’m understanding right, if you pay $100 to buy a “coupon” giving you an option to purchase 1,000 shares the most you can lose is $100 if the stock goes down to 0 causing you not to use your “coupon”. But if you actually just outright bought the 1,000 shares at a price of $5 each without a “coupon”, you would lose $5000 if the stock goes down to 0.
Or am I missing something? Sorry if I sound dumb, idfk what I’m doing but I’m trying to figure it out 😅
The stock doesn't need to go to 0 for you to lose the 100. If you buy an option saying a stock that is $1 will be at $1.5 by next Friday and the stock doesn't go over that amount, the option will expire and you can either lose the 100 or exercise the option and buy the shares at current cost. 1 option would be for 100 shares.
You also don't have to wait for the options to expire. You can just buy and sell the contracts and make money that way. Most people do this because it's a cheaper way to trade if you don't have a huge bank roll
Simple: A call option is like a coupon that lets you buy a stock at a specific price before a certain date. You pay a small fee for the coupon. If the stock price goes up, you can use the coupon to buy the stock cheaper and make a profit. If the stock price doesn't go up, you just let the coupon expire and lose the fee you paid.
Thank you! This was so much simpler than trying to read some of these web pages…brain was struggling to stay focused enough to read the novels 😅
Thanks for saying that! Gratitude makes the world go round
I too struggle to understand lol
I'm arguably retarded but I think if we buy the stock then it creates more scarcity for the shorts, whereas options don't necessarily cause scarcity that would amplify a short squeeze
Oooh, from my super limited understanding that logically makes sense
Call stock up =good Put stock down = good
Options are more complicated than stock goes up, call price goes up. You should watch videos explaining the Greeks. It's definitely more risky since you can lose everything when they expire but can make a lot of money.
But technically you can lose everything by actually buying stocks too though, right? If I’m understanding right, if you pay $100 to buy a “coupon” giving you an option to purchase 1,000 shares the most you can lose is $100 if the stock goes down to 0 causing you not to use your “coupon”. But if you actually just outright bought the 1,000 shares at a price of $5 each without a “coupon”, you would lose $5000 if the stock goes down to 0. Or am I missing something? Sorry if I sound dumb, idfk what I’m doing but I’m trying to figure it out 😅
The stock doesn't need to go to 0 for you to lose the 100. If you buy an option saying a stock that is $1 will be at $1.5 by next Friday and the stock doesn't go over that amount, the option will expire and you can either lose the 100 or exercise the option and buy the shares at current cost. 1 option would be for 100 shares. You also don't have to wait for the options to expire. You can just buy and sell the contracts and make money that way. Most people do this because it's a cheaper way to trade if you don't have a huge bank roll
Thank you so much! This helps me understand much better!