Trades

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

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