re: SLV

Options are pretty simple. Start by just buying calls and puts. You are buying the right (but not the obligation) to either buy, or sell, at a set price, on a set date. Consequently, your only risk is the price you pay for the option. That's it.

So if you bought a 1/2016 call on SLV at a $20 strike price, it would cost you $325 per contract. Each contract controls 100 shares. You'd need silver to get above $23.25, by 1/15/2016. A good way to go long, without laying out the funds needed to buy the shares.

Keep in mind, the break even of $23.23 is in theory. SLV could be trading at $22.00, and your call could be worth $4.50, or $450.00. Time premium. It works both ways.

Or if you own the shares, you can sell the right to buy to someone (covered call) as insurance, or buy the right to sell (covered call) as in each case you own the actual shares.

I sell a lot of covered calls.

As an example I bought 3500 shares of PAL, and immediate sold 35 $1 strike price covered calls. Someone paid me $200.00 to buy these from me. It reduces my cost basis in the security. The only danger is that PAL goes to $7, and I have to sell at $1. Selling at $1 is still profitable for me, and I need to feel the pain of not being able to sell at a higher price.

I gather everyone on here is pretty smart. I enjoy reading and discussing this stuff.

It wasn't my intent to talk down to anyone. I don't think you said that, but I just wanted to clarify.

I'm a huge silver bull. Long term, own the bullion. I do like to trade also, and my favorite trades are usually very complex derivatives trades.

Right now I have a 17 options spread, designed for the gov't shutdown/debt crisis for Feb/Mar. It involves, DJX, SPY, QQQ, VIX and VXX. I also bought and sold futures contracts on all of these, and options on the futures contracts.

On the VIX this guy had a similar idea
also designed around February:

LINK

He has a bit more skin in the game than I.

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What's a put?

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Now you've done gone and spoiled it.

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What, I was just sticking up for you...


You know what, I'm going the frick home

I've never fooled with options so after reading the last page I figured I'd go do something simple like 1 covered call or put contract just to mess around. I had to apply with my brokerage (Schwab) to do covered calls and puts. I understand doing messing with uncovered stuff or some of the more exotic crap that I don't understand. But covered?

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I've never fooled with options so after reading the last page I figured I'd go do something simple

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Id love to understand this stuff and do it

I've looked at trading options but I've just never figured out how I can make more money doing it instead of buying/shorting the shares themselves. I realize the downside risk can be limited but I can do that with stop limits.

I know some people who trade options because they can get the benefit of trading on larger blocks of shares without having the money to actually buy that many shares.

If you write (sell) options, the buyer will only exercise his option if it benefits him, which means it hurts you and it's out of your control what he does.

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I had to read the definitions of puts and calls at least two times each before I really grasped it and then go find a calculator on the internet to show me exactly what would be going down. I'm still not sure I really know WTF is going on.

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Since you've done your research, can you explain what you have found, in laymans terms?

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Since you've done your research, can you explain what you have found, in laymans terms?

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I'll butt in here but my explanation below is far from complete.

A call option gives the buyer of the option the opportunity to buy a block of stocks (in lots of 100 shares) at a set (strike) price. The person who buys the call option pays a price to the seller (writer) of the call option and this price is called the "premium."

Obviously the buyer of the call option hopes and/or expects the price of the underlying stock to go up. If it does, and the stock's price exceeds the "strike" price, he can exercise his option and buy the stock at the lower strike price and immediately sell the shares at a profit (minus what he paid for the option).

Or, he can simply sell the option itself which has also increased in price because the underlying security has increased in price.

A put option is the reverse; it gives the buyer of the option the opportunity to SELL the underlying security at a set price. The buyer of a put hopes and/or expects the stock's price to fall and he can make a profit if the price of the stock falls below the strike price of the option (minus what he paid for the option). Like a call option, a put option also has a market value and if the price of the underlying security falls, the market price of the put option goes up. So the buyer of the put can simply sell his option and make a profit, again minus what he paid for the option.

Put options are also used to protect the downside risk of a security owner just in case his stock declines in price. He can guarantee himself a price at which he can sell his stock.

I know what you mean!