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15552442 No.15552442 [Reply] [Original]

Can someone explain PUTS and CALLS, as if I was 5?

>> No.15552449

>>15552442
this is not plebbit you retarded mongoloid faggot

>> No.15552458

>>15552449
Yeah, but I'm not gay enough to go on reddit.
That's why I went to /biz/...

>> No.15552459

If you have to ask you either dont have the money to be doing that or plain stupid. Im betting on stupid.

>> No.15552462

>>15552449
The suvreddit is Eli5 not Aiiw5 you dumbass.

>> No.15552463

>>15552442
Calls are the right to buy puts are the right to sell

>> No.15552472
File: 72 KB, 731x708, EDv8G53XoAUbEuR.jpg [View same] [iqdb] [saucenao] [google]
15552472

>>15552462
exposed

>> No.15552484

>>15552463
Yea, I go that part.
But I'm not actually buying/selling a stock.
I am giving insurance. So, where does the money come from?
Especially since I have an obligation to sell calls, and buy puts. They sounds like opposites.

>> No.15552493

>>15552442
Buy calls when you think the stock price will go up!
Buy puts when you think the stock price will go down!

There you go, explained as if you were 5. Not going to get into the mechanics of vega, rho, gamma, beta, intrinsic value, extrinsic value, beta/theta decay, leverage or assignment risks with a 5 year old.

>> No.15552501

>>15552442
If you have a put, let's say for the ability to sell someone 100 shares of google stock at $1200 per share, and it cost you 25¢ per share. So your cost is $25 so far. But now let's say that Google shares drop to like $1010 per share and you still own those put options. They will gain that difference in price between $1200 and $1010. So it would be a gain of roughly $1900 if you now sell that put option. It doesn't work exactly like that but that's the basic idea behind it not including the other factors that effect the price of options.

>> No.15552509

>>15552484
when you sell an options you are obligated to complete the contract if they choose to executed. They paid you in advance in a form of preimum when you sell the contract (either put or call)

>> No.15552513

>>15552501
Yea, I get that.
But I never owned those stocks.
Does a magic faerie just drop money in my pocket?

>> No.15552515

>>15552484
Think of them as contracts to the right to buy/sell shares. One option contact usually controls 100 shares of stock. So if you buy one call option for XYZ at a strike of $1 and it goes up to $2 the intrinsic value of the option is $100 because you have the right to buy those shares for $1 even though they are two right now. This is basic, but there are a myriad of other factors that affect an option's price (see the "greek") but if you buy a call and the price is above your strike - you made money. If you buy a put and the price is below your strike - you made money.

>> No.15552519

>>15552513

If you are selling options you collect a premium from whoever bought the contract.

>> No.15552524

>>15552484
If I told you I would sell you a stock that is trading at 10 bucks a share for 2.50 a share, how much would you pay me? Would you pay me more if it wasn't going to expire soon and was bullish on it?

If you don't understand that, then please get some books. You should get books anyways before even trying to trade options. I'm not being rude, but this is the basic concept of a call and you will lose a lot of money on options if you don't have a good grasp on the market

>> No.15552525

>>15552513
No, you sell it as if it were any other security through your broker. Basically the broker makes a market in options and obviously have a bid and ask spread so they can make some money on the whole operation also.

>> No.15552531

>>15552519
oh! Like communism?
If they lose money, I have promised to lose money with them.
If they earned money, they promised to give me some?

>> No.15552536

>>15552531
you are really a retard, if they lose you win, if they win you lose.

>> No.15552539

>>15552531
Quit being retarded

>> No.15552542

>>15552536
>>15552539
Back to square one with this. They are total opposites.
Sorry, I'm not trying to be retarded, it just comes naturally.

>> No.15552553

Can we do like fruits?
Instead of trading stocks, can we trade apples?
I feel like a physical object would make more sense.

I don't get why if someone lost an apple, I magically gained one.

>> No.15552596

>>15552553
If you can get me to contractually agree to buy 20 apples from you at $2 an apple, and the price of apples drops to 80¢ per apple, then your contract has a positive monetary value because of the price difference between the agreed upon price($2) and the market price(80¢). So you can sell that contract to an exchange or third party for a profit. Get it?

>> No.15552632

>>15552553
selling options(call/put), you obligated for the contract. You sell them a put contract of apple, you promised to sell them at $1 for x amount expire at a certain date for a premium of x amount(thats your profit). If apple goes up to $3 on/after the expired date. You now obligated to sell them at $1. Your loss will be premium-cost $3. If apple goes down to 50c they usaully dont execute this contract because they can buy from the market for cheaper, you get to keep the premium. Call is the opposite.

>> No.15552641

>>15552596
Yes! And on the flip side, if I make you buy 20 apples for $2, and the price goes up to $4. I can ask you to give me those apples back, and then I can turn around and sell those apples to an exchange, or third party.

So, I'm not holding the stock, another person is. It's basically damage control. If the stock doesn't do well, I take the hit. If the stock does well, I gain the profit.

>> No.15552657

>>15552641
this is when you are the buyer of the options

>> No.15552671

>>15552632
>>15552657
I think I understand where this money is coming from.

Basically, a PUT sell is someone saying "I think this stock will do well." and me going "no, it won't." Give me money for what you think it's worth. After the exp date, I'll give back what the stock is actually worth.

>> No.15552682

>>15552671
You don't actually have to own a stock or asset to buy options on it though.

>> No.15552687

>>15552682
Yea, I know that part. That was also part of the confusion.
But this is right, right? >>15552671

>> No.15552699

>>15552687
Yeah, kinda?!?! lol

>> No.15552704

>>15552671
correct, options traders are literally gambler degenerate.

>> No.15552716

>>15552704
K! I think I get it. It's like going to a casino.
The slot machine is like the stock market.
You think that your friend is going to lose money, but he thinks he will win money. So you give him money, and if he wins, you want some of the earnings, but if he loses he owes you.

>> No.15552728

>>15552716
Or to be more exact. He's not even playing on the slot machine, you're literally better on weather or not the guy beside you is going to win.

>> No.15552787

>>15552671
There is one thing i want to correct, you wont be asking money from him you be paying him upfront(in form of premium) for his contract because he is the seller and you are the buyer.

>> No.15553379
File: 6 KB, 225x225, 17458r.jpg [View same] [iqdb] [saucenao] [google]
15553379

>>15552458
>he thinks /biz/ is less gay than reddit

>> No.15553451
File: 24 KB, 459x317, silver options trade.png [View same] [iqdb] [saucenao] [google]
15553451

>>15552442
I make money trading options
see picture made 300% in one month on buying SLV Call options

If you buy options
Call options = money if price goes up
Put options = money if price goes down

If you sell options
Call options = money if price goes down
Put options = money if price goes up

I recommend both buying and selling options

Ask me more questions if you want