Replies to post #1391 on Zynga Inc (ZNGA)

[HotRod11686]

Do you know how options contracts work?

CALL OPTION : Dec 2012 Strike $5 - each contract = 2.10 / each contract = 100shr

So you pay 2,100 for the 10 contracts or 1000 shrs

If you EXCERCISE the contract, you get to buy the 1000 shares of Zynga stock at $5 a share. Else you could sell the contract if they are appreciated, so lets say the stock is worth $14 on Dec and the 2.10 you paid is now 5.10 for each contract, do the math

$3x1000 = 3000 profit if you sold the contract.

Else you'd have to cough up $5000 to buy the 1000 shares,
you instantly get the price diff from 14-5 = 9/shr .

1000shrs worth $14,000
Bought @ 5.00 through option : $5000 + Option Premium of $2100 = Total $7100

Mtk Price - 14,000 . Cost to buy $7100 - Instant profit of 6900

ONLY if the stock is worth that much in DEC. else do the math!