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Zecco.com » General Investing » Options Trading » Question on Call Option
Last post 05-17-2008, 5:57 PM by jacobyjj. 4 replies.
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  •  05-12-2008, 11:57 AM 28934

    Question on Call Option

    Reply Quote

    Just trying to gather information and learn...

    If I believed the price of the XLF would rise between now and June expiration date (June 21), I could buy a call option.

    Right now, the XLF is at ~$26. A $31 June option is priced at $0.08. Does this mean if I bought one contract, the strike price would be $31? So in order for me to make money, the XLF would have to track above $31 prior to June 21? What if I exercised the option right at $31?

  •  05-12-2008, 12:48 PM 28937 in reply to 28934

    Re: Question on Call Option

    Reply Quote

    I'm trying to write a Close to Sell stop-limit order to lock in some profits but the trade will not go through, the screen says "Out of Range".

    The option is at $7.00 and I'm writing the stop-limit at $6.25 on a option that cost me $4.00.

    Anyone know what I'm doing wrong?

     

  •  05-12-2008, 3:52 PM 28955 in reply to 28937

    Re: Question on Call Option

    Reply Quote
    fred1119:

    I'm trying to write a Close to Sell stop-limit order to lock in some profits but the trade will not go through, the screen says "Out of Range".

    The option is at $7.00 and I'm writing the stop-limit at $6.25 on a option that cost me $4.00.

    Anyone know what I'm doing wrong?

     



    I think you meant to post this in another thread.  In any case, I've had that message before and I ended up calling the trading desk.  They fixed something on their end and I was good to go.   Call the desk and see if they can help.


    -Sean

  •  05-12-2008, 4:02 PM 28956 in reply to 28934

    Re: Question on Call Option

    Reply Quote
    ahurst:

    Just trying to gather information and learn...

    If I believed the price of the XLF would rise between now and June expiration date (June 21), I could buy a call option.

    Right now, the XLF is at ~$26. A $31 June option is priced at $0.08. Does this mean if I bought one contract, the strike price would be $31? So in order for me to make money, the XLF would have to track above $31 prior to June 21? What if I exercised the option right at $31?



    To answer you first question, yes the strike price would be $31.    You could make money if the XLF moved up some but  was still under $31.  However, time is your enemy and the closer you get to expiration the higher the stock price will need to trade before you make money.  An increase in implied volatility would also make the option worth more but with an ETF that is unlikely to be much of a factor.

    If you exercise the option @31 you would have to hold the stock and hope it goes a little higher in order to recoup the costs of the option and commissions. 




    -Sean

  •  05-17-2008, 5:57 PM 29290 in reply to 28937

    Re: Question on Call Option

    Reply Quote
    Put in $6.20 or $6.30. Options priced below $3.00 have 0.05 increments, over $3.00 have 0.10 increments.
    The CBOE has a penny options pilot program (http://www.cboe.org/ for some stocks. Only these options are priced in penny increments
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