Options Pop Review – The Reasons Why Investors Buy Options
The purpose of Options Pop Review is expand investors’ minds towards the best way to choose. Analysing the stock and option´s market, the biggest profits come from owning Call or Put options. And the reason for it is that despite buying options is highly risky, it has a high reward. So, what happens is that “Call Option” buyers make a great deal of moneywhen the stock rises in price. The same way, “Put Option” buyers make the most money, but only when the stock drops in price.
Options Pop Review – The Option Buyer´s Advantage
Traders use options because they aim at a huge return in exchange for little investment. Therefore, this strategy represents the power of leverage. Take for instance Amazon. Suppose that Amazon was great to trade, because the stock was about to make a big move up and you bought 1000 shares of the stock. Since each share costs $1824, you would pay $1,824,000 to buy 1000 shares.
Now imagine that right after buying Amazon shares, it jumps up its price by $13.00 per share. This rise gave you a profit of $13.00 on each of your 1000 shares, that is, $13,000.
But let´s start over…
and suppose that you wanted to use options on Amazon instead. An “option” gives you the right, not the obligation, to buy shares of the stock. Thus, visualize you bought an option to buy shares of Amazon for $.75 cents each. Having in mind that each option contract equals 100 shares of stock, so 10 contracts control 1000 shares. It means that it would cost you $750. In this example, when the stock price of Amazon jumped up by $13 in one day, the price of the Amazon Call Options went from $.75 cents to $2.25. In other words, your profit was $1.50, not as much as the stock. However, since you controlled 1000 shares of stock, you ended up with a profit of $1500.
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