A.I.M. Users Bulletin Board

[SFSecurity]

Hi Toofuzzy, As to having money in my account to pay for the stocks I can transfer the money in 24-48 hours so the margin cost would be nill or not at all if I get it in prior to the trade's closure.

Now, I'm not sure I understand what you are you saying, buying a LEAP at a price of exercise price of $15/share where the cost of the LEAP is what?

In a quick check of EWZ, a position I have an option on at the moment, the Jan 17 2020 CALL doesn't even go as low as half the current price. with the current price being ~$34.05, the lowest CALL is $20 and the last price is $13.95 or $13,950 for the one thousand shares. This would get you in at a total price of $20,000 for the shares plus what you paid for the option, $13,950, or a total of $33.95 per share, about $100 less than current price with a wait of 553 days. If the shares dropped to $30 prior to exercise you would lose $3.05/share.

I looked at several other options and buying CALLs seemed to cost about the same, or slightly more, total cost, what you paid for the options and what you pay for the share when you exercise the option.

Maybe I don't understand buying CALLs, but I thought you can't get the shares unless the price of the shares stays above the exercise price of the CALL. If it drops significantly but stays above the exercise price it seems to me you can lose a bundle.

If I understand it correctly when buying an in the money call one wants the share price to go up to make a profit.

"A call option buyer stands to make a profit if the underlying asset, let's say a stock, rises above the strike price before expiry."

https://www.investopedia.com/articles/active-trading/091714/basics-options-profitability.asp

But one mustn't forget to include the price one paid for the option.

Check out https://www.optionsellers.com/ or read their book. Although they are talking about options on commodities, as I understand it roughly the same holds true for stocks and ETFs except that commodities have regular cycles while stocks and ETFs don't making them riskier on the whole.