Options Action 2/27/09

Pops & Drops

Hi everyone... I thought it would be a good idea if I would post CNBC's Fast Money Pops & Drops. In my introduction to my blog I mentioned that I have no stocks to recommend ... but I figured that it would be a good idea to post Pops & Drops so you can get an idea what stocks real on the floor traders looking are to trade...click the picture on the left!

Reuters text... 2/26/09

Hello everyone,

My cell phone has been busy all morning.. reuters text messages:

• GM reports worse-than-ever expected Q4 lost of 15.71/share on revenue of $30.8 bln.
• Durable goods orders fall to 5.2% in January, a 6 year low; stocks cut gains
• US January new home sales fall 10.2% to record low but stocks gain.

wooo... hope we could get thru all this bad news!

Option Action.. 2/20/09 click on the picture below!

Option Action is a new show on CNBC that analyzes options. Check out the show and see how options traders talk about how options work!

Reuters text... 2/12/09 8:38am

January retail sales post surprise 1% rise, stock future pare loses.

Intrinsic Value

is the difference of the stock price and the strike price. Intrinsic value is the option's "in the money".. ITM portion of the option. If the stock opton is in the money.. the investor can sell or exercise the option for profit.

Call Option Intrinsic Value = Underlying Stock Current Price - Call Strike Price.

Put Option Intrinsic Value = Put Strike Price -Underlying Stock Current Price.

So follow me using the strike price graph above:

Call Option: If the Underlying Stock Price is $100 and the Call Strike Price is $95 then the intrinsic value is $5.00.

Put Option: If the Put Strike Price is $105 and the Underlying Stock Price is $100 then the intrinsic value is $5.00.

Also, you see in the graph as the stock moves above or below within the context of the call or put option... the intrinsic value rises.... $5... $10, etc. Remember.. this is when you sell or exercise your option that is ITM.

Any option that is "OTM"... or Out of the Money has no intrinsic value... it would expire worthless.

Wooo! that's a lot of words!