Trade Findings and Adjustments 01-13-22

Trade Findings and Adjustments 01-13-22

The 4 Option Instruments

1. Long Call Option
2. Contract
3. Buy To Open
4. Right to BUY the underlying stock at a certain stock price for a certain period of time
5. Goes up in value or down in value WITH the movement of the stock
6. Debit: premium for the contract
7. Ex: AAPL trading at 175 per share will have call options that might cost $5 of premium
8. Many different option choices: Strike prices and expiration time.
9. AAPL 175 strike Feb 18th 2022 which costs $5.22
10. 1 Option contract controls 100 shares of underlying stock
11. So this option would be $522 in real cost, even though it’s listed as $5.22

Leap Long Call “stock replacement” strategy

• Go out 1 year or more in expiration date
• Look at nearest highs and all time highs
• Higher strikes are cheaper premium cost
• FB 350 strike out to Jan23 (1year)
• Leave room in cash holdings to “dollar cost average” and lower the breakeven cost
• Wait until our call option contract is half off of the original price before considering doubling down with more Call option(s).
• Want to avoid “doubling down” more than 3 times