One thought on “What are factors to consider when buying a call?

  1. Arti says:

    Changes in the market can affect the value of your put option and your ability to close it. Changes in the market can affect the value of your put option and your ability to close it. If your option isn’t very liquid, it can be hard to sell it for its intrinsic value. If your option isn’t very liquid, it can be hard to sell it for its intrinsic value. First, a few options aren’t as liquid as others. First, a few options aren’t as liquid as others. First, you can benefit from an increase in the price of the underlying stock, since you own those shares. First, you can benefit from an increase in the price of the underlying stock, since you own those shares. Also, as the stock price rises, the value of your short call position declines. Also, as the stock price rises, the value of your short call position declines. Also Also If your option isn’t very liquid, it can be hard to buy it back for its intrinsic value. If your option isn’t very liquid, it can be hard to buy it back for its intrinsic value. For selling a covered call, two of the more common edge cases are: Early assignment risk and dividend risk. For selling a covered call, two of the more common edge cases are: Early assignment risk and dividend risk. Meanwhile, buying a put gives you the right, but not the obligation, to sell shares of a stock at the strike price by the expiration date. Meanwhile, buying a put gives you the right, but not the obligation, to sell shares of a stock at the strike price by the expiration date. For that reason, options with later expiration dates are likely to have higher premiums. For that reason, options with later expiration dates are likely to have higher premiums. Here are a number of key factors: Here are a number of key factors: When buying a strangle or straddle, there’s no risk of early assignment or dividend risk. Here are a number of key factors: Here are a number of key factors: When buying a strangle or straddle, there’s no risk of early assignment or dividend risk. When buying a strangle or straddle, there’s no risk of early assignment or dividend risk. When buying a strangle or straddle, there’s no risk of early assignment or dividend risk. Here are a number of key factors: Here are a number of key factors: Meanwhile, buying a put gives you the right, but not the obligation, to sell shares of a stock at the strike price by the expiration date. Here are a number of key factors: Here are a number of key factors: Meanwhile, buying a put gives you the right, but not the obligation, to sell shares of a stock at the strike price by the expiration date. Assuming all other factors are constant, the further away an option’s expiration date, the lower your risk of loss. Assuming all other factors are constant, the further away an option’s expiration date, the lower your risk of loss. Here are a number of key factors: Here are a number of key factors: For selling a covered call, two of the more common edge cases are: Early assignment risk and dividend risk. Here are a number of key factors: Here are a number of key factors: For selling a covered call, two of the more common edge cases are: Early assignment risk and dividend risk. If you don’t, the option expires, and you no longer have the right to buy the underlying stock at the strike price. If you don’t, the option expires, and you no longer have the right to buy the underlying stock at the strike price. That’s because there’s more time for the stock price to potentially rise. That’s because there’s more time for the stock price to potentially rise. When buying a call, there’s no risk of early assignment or dividend risk. When buying a call, there’s no risk of early assignment or dividend risk. You can learn more about potential edge cases regarding corporate actions here. You can learn more about potential edge cases regarding corporate actions here. In exchange for these rights (known as the ability to “exercise” the options) you pay an upfront cost (the “premium”) for these contracts. In exchange for these rights (known as the ability to “exercise” the options) you pay an upfront cost (the “premium”) for these contracts. When buying a put, there’s no risk of early assignment or dividend risk. When buying a put, there’s no risk of early assignment or dividend risk. Expiration date: If you want to either sell or exercise your option, you must do so by this date. Expiration date: If you want to either sell or exercise your option, you must do so by this date. Here are a number of key factors: Here are a number of key factors: For selling a cash covered put, early assignment risk is one of the more common edge cases. Here are a number of key factors: Here are a number of key factors: For selling a cash covered put, early assignment risk is one of the more common edge cases. For selling a cash covered put, early assignment risk is one of the more common edge cases. For selling a cash covered put, early assignment risk is one of the more common edge cases. Using long straddles and strangles means buying a call option and a put option on the same underlying stock with the same expiration date. Using long straddles and strangles means buying a call option and a put option on the same underlying stock with the same expiration date. Buying a call means entering a contract that gives you the right, but not the obligation, to buy shares of a stock at a certain price (the “strike price”) up until a set date (“expiration date”). Buying a call means entering a contract that gives you the right, but not the obligation, to buy shares of a stock at a certain price (the “strike price”) up until a set date (“expiration date”).

Leave a Reply

Your email address will not be published. Required fields are marked *