Puts and calls | Imamother

amother

Natural

Tue, Jun 02 2020, 4:12 pm

amother [ OP ] wrote:

do you know what this is? looking for clear explanation (type of investing)

My husband has been doing this for many years so I know alot about this stuff.

A "call" gives you the right to buy a stock at a pre determined price for a certain amount of time. For example lets say AAPL is trading at $325 right now. I can buy a 1 call at (for example) $350 that will expire in a month from now. 1 call is worth 100 shares. Let's say I pay $1 for the call, meaning it'll cost $100 for 100 shares. That means that any time in the next month I can "exercise" the call I bought and buy 100 shares of AAPL at $350. So if AAPL shoots up to $375, I can exercise my right to buy it at $350. I can also sell the call itself if AAPL increases in value right after I buy the call.

There's so much info that as I'm typing this I'm not sure if it's clear. Do you have a specific question?

doctorima

Tue, Jun 02 2020, 4:19 pm

They're types of options that you can buy or sell on various positions. If you know what you're doing, they can be very lucrative, but they're also extremely volatile, and if you're on here asking what they are, I would strongly advise you to steer clear of them and put your money in an index fund - mutual or ETF - or get in touch with a professional investment advisor.

Ora in town

Tue, Jun 02 2020, 4:32 pm

Risky investments.
Banks recommend to invest maximum 5-10% of your portfolio in this kind of product, and to invest only money that you can afford to lose.
Buyer beware...
you can lose all the money you invest...

It's a kind of bet on the future of the stock market...
Either you bet it will go up, within a certain period than you aquire calls...
If it goes down instead, you lose all your money.

Or you bet it will go down, then you take puts.
In puts, you aquire the right to sell shares X at the price of 100 in 1 month...
If the share price goes down to 80, you win 20 per share, minus the price of the put option. if the share price does not go under 100, you lose all your money.

Puts and calls have an expiration date...
if the anticipated event does not take place within the fixed period of time, you lose all the money you invested... options lose all their worth...

Then there is something even worse than puts, where you can lose an indefinite amount of money, that's the short position. In this case, you get paid a kind of "insurance premium" for providing share X at price 100 at a certain date... If by this date the share price goes up, you have to pay the difference...

And also banks charge commissions, which you lose anyway, which you always have to deduct from the possible profits...