BKoptions

Options Action 2/27/09

2009-03-02T10:38:00.000-08:00

Pops & Drops

2009-02-26T12:23:00.001-08:00

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

2009-02-26T12:16:00.000-08:00

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!

2009-02-22T15:26:00.000-08:00

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

2009-02-12T10:06:00.000-08:00

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

Intrinsic Value

2009-02-11T07:28:00.000-08:00

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!

Strike Price Graph

2009-02-11T04:04:00.000-08:00

This is a graphic of an option's Strike Price graph. As you can see the middle price of $100 is the stock price. "ATM" is "At The Money". This means the option purchased by an investor to be bought or sold has a strike price that equals the stock price. An option that is ITM has "intrinsic value". "ITM" means "In The Money". A call option is ITM when the Exercise Price is below the current Stock Price. A put option is ITM when the Exercise Price is above the current Stock Price. "OTM" means "Out of the Money", a call option is OTM when the Strike Price is higher than the current stock price. A put option is OTM when the Strike Price is lower than the current stock price.

CNBC's Fast Money!

2009-02-10T07:52:00.001-08:00

Watch Fast Money Videos to Find The Latest Business News

You Trade when....

2009-02-06T04:01:00.000-08:00

during these economic times you have to be careful with money. IF and only IF you have EXTRA, EXTRA money.. you play the stock market. If you have EXTRA money, you find a good investment. Whether it's an IRA, Roth IRA, Money Markets or Mutual Funds. Before you decide to trade.. think about it... would you take your money and go to Vegas with it? If the answer is NO.. please do not trade!

Black Scholes Model

2009-02-05T11:47:00.001-08:00

is a theory used to determine option pricing. This model combines stock price, strike price, and time value of the option. The Black Scholes model is the most used used theory in option pricing.

reuters text 2/3/09 @12:57pm

2009-02-03T09:58:00.000-08:00

Ford says January U.S. sales down 40.2%.

reuters text 2/3/09 @10:26am

2009-02-03T07:27:00.000-08:00

Decemeber pending home sales index rises 63%.

Option Pricing Theory

2009-02-03T07:22:00.000-08:00

Any model- or theory-based approach for calculating the fair value of an option. The most commonly used models today are the Black-Scholes model and the binomial model.... investopedia.com

reuters text 1/30/09 @ 8:41am

2009-01-30T06:20:00.000-08:00

Q4 GDP declines, better than expected @ just 3.8% (some economist was expecting 7%) stock futures turn higher.

reuters text 1/29/09 @10:27am

2009-01-29T07:36:00.000-08:00

December home sales fall 14.7 percent; annual sales pace hits record low.

Option Pricing

2009-01-29T05:10:00.000-08:00

is a terminology used to describe a series of terms that determine the value of an option. In the next couple of posts I will give you those terms and why they are important to option pricing.

reuters text - 1/29/09 @7:31am

2009-01-29T05:08:00.000-08:00

Ford reports Q4 loss of $2.46/share, $5.5 billion cash burn, no need for government loan.

reuters 1/28/09 @ 11:25am

2009-01-28T08:43:00.000-08:00

Boeing CEO says targeting 10,000 job cuts, or 6% of current workforce.

Exercise Price

2009-01-28T07:27:00.000-08:00

the price at which the underlying security can be purchased (call option) or sold (put option). the exercise price is determined at the time the option contract is formed.... investopedia.com

Exercise

2009-01-28T07:04:00.000-08:00

an action by a stockholder take advantage of a privilege offered by a company or other financial institution. This includes warrants options and other exotic financial instruments.

when you exercise your stock option you "trade in" your option for the actual stock.... investopedia.com

Strike Price

2009-01-27T14:42:00.000-08:00

The predetermined price at which an option can be exercised. For example, a buyer of a call option with a strike price of $45, would give the call option owner the ability to purchase shares in the underlying security at $45, before the option expires.... investordictionary.com

Ooops.. reuters.. 1/27/09 @ 4:32pm

2009-01-27T13:35:00.000-08:00

Yahoo reports Q4 loss of $0.22 per share on a revenue of $1.81 billion.

... my next post will be the definition of a Strike Price.

Stock Options Chain

2009-01-27T12:13:00.000-08:00

On the Right is a picture of a stock option chain. A stock option chain is a list of options that you can buy or sell. As you can see at the top of the page is stock symbol.. AAPL which is Apple, Inc. Next you see below the Stock symbol is a drop down box of expiration dates of when the options expire. Each option, which have their own symbols are separated by Calls and Puts. In the middle is the strike price of each symbol (strike price will be my next post). Next to the symbols is a list of the BID & ASK for each symbol. The bid & ask is the cost to buy or sell each option. The bid would be the amount would sell the option for, and the ask would be the cost to buy it.

People You Should Know!

2009-01-27T07:28:00.000-08:00

On the side, you will find a list of people you should know when trading. Be either they are politicians, CEOs past and present, if they make an investment in the market or say something about the market.... the market listens. If you want to learn more, please click on each name.

reuters 1/26/09 @4:46pm

2009-01-26T14:33:00.000-08:00

American Express reports Q4 EPS of $0.15 on revenue of 65bln, shares rise 2%

reuters 1/26/09 @ 10:25am

2009-01-26T13:06:00.000-08:00

December existing home sales up 6.5%; YOY median price falls record 15.3%.
YOY (Year Over Year) - a method of evaluating two or more measured events that compares the results of measurments at one time period with those from another time period (or a series of time periods) on a annualized basis. Year Over Year comparisons are a popular way to evaluate the performance of investments. Any measurable events that recur annually can be compared on a year over year basis - from annual performance to daily performance..... investopedia.com.
Investors used the Year Over Year method to measure the performance of their company.

reuters 1/26/09 @ 8:50am

2009-01-26T12:50:00.000-08:00

Caterpiller says to cut about 20,000 jobs, shares to drop more that 12 percent... Caterpiller is a stock is on the Dow Jones list. This information will effect the the Dow.

Reuters! (1/26/09)

2009-01-26T12:48:00.000-08:00

every day, a couple of times a day, I get text messages sent to my phone from Reuters. Reuters is a business website that tells you what's new in the business world. so.. I will be posting the text messages on my blog. the texts sent by Reuters is important information you should have while trading. ..some of the info move markets:
Phizer says to acquire Wyeth for $68 billion; to cut 10 percent of workforce.
McDonalds report Q4 (4th quarter) EPS (earnings per share) $0.87 on revenue of $5.6 billion; to open 1000 stores...... wow! at least someone is making money in this economy!

Reality Check

2009-01-26T12:45:00.000-08:00

the market is a risky place to play. it's legal gambling! especially now with the economy the way it is. during these times everything effects the market. jobs reports, earning reports, GDP report... President Obama all effect market. at these times you have to keep a close eye on what you trade, learn strong trading strategies, money management strategies and you will be fine in this market.

Boring Rhetoric!

2009-01-26T12:42:00.001-08:00

another reason why I decided to write this blog is because when I was starting out trying to get into the market, I could never find one place with all of the information I needed. Either, I would have to pay hundreds or even thousands of dollars to learn definitions, strategies, and charts to make money. What kind of profit would I make by paying all that money? So... Stock Option, Call Option, Put Option... blah... blahh.. blah... is nothing but "boring rhetoric". But this is what I had to learn in order to get into the market to make money... which I have. So, this blog is for the people who want to learn the stock market, get into the market and make money.... and it's all in one place and it's free!... LOL!

Short Position

2009-01-26T12:40:00.000-08:00

the sale of borrowed security commodity or currency with the expectation that the asset will fall in value.
in the context of options it is the sale (also known as "writing") of an options contract... investopedia.com
"borrowed" means ... you borrow shares or option contracts of a stock from the broker in an open market. Eventually you will have to pay back what was borrowed, you do that by buying back what you sold. If the stock falls in price you are buying back less than the original sale, and that's your profit.

Long Position

2009-01-26T12:39:00.000-08:00

buying of a security such as a stock, commodity or currency with the asset will rise in value.
in the context of options, the buying of an option contract.....investopedia.com

Put Option definition

2009-01-26T12:37:00.000-08:00

an option contract giving the owner the right, but not the obligation to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option which gives the right to buy.... investopedia.com
The put option is used when you think that the stock is going down... like I said before.. remember these options expire on the 3rd Friday of the month.

Call Option definition

2009-01-26T12:12:00.000-08:00

an agreement that gives an investor the right (but not the obligation) to buy a stock bond commodity or other instruments at a specified price within a specified time period.... investopedia.com
A call options is a contract you buy or sell that is affilated with the underlying stock when you think the underline stock is going up.... remember the option expires every third Friday of the month.

Stock Option definition

2009-01-26T12:10:00.000-08:00

A privilege, sold by one party to another, that gives the buyer the right, but not he obligation to buy (call) or sell (put) a stock at an agreed upon price within a certain period on a specific date.... investopedia.com.
Trading stock options is like renting an apartment. You rent the apartment without the obligation of buying it. The option contract is the lease, the stock is the building owner, the price is the cost to rent the apartment. Option contracts expire on the 3rd Friday of the month.. just like your lease on the apartment which expires on the date set buy the building owner of which you've agreed upon.

My Introduction

2009-01-26T12:03:00.000-08:00

This blog is with the intent of sharing information on trading stock options. I am an amateur trader... been trading for 3 years now. So, I figured that I could blog my experience as well as give tips on how to read charts and learn options trading terms. Please note, this is not an investment blog. I don't know what's the "hot stock of the week". I am not recommending any stocks to invest in.... So, with that being said, I would like to thank you for visiting my blog...and invite you to the would of options trading!