Boiler Room: The Official Stock Market Discussion

yakamein

yakamein

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hashmander said:
in my case i'm buying options, puts when i feel the stock price is going down and calls when i feel it's going up. the contracts have a strike price, expiration date and limit price. the strike price is what the writer of that contract will pay you per share on that expiration date and you can sell before the expiration date. each strike has a limit price per share. a contract is 100 shares. so 100 multiplied by the limit price is the cost of the contract at that strike. the cost of the contract is your risk. the writer of that put option is obligated to buy at that strike price.

so on monday afternoon PCG was trading at around $34.5. i posted about missing the boat on friday and on monday afternoon when it rose up to ~$34.xx i still felt the same way i did on friday that PCG was probably liable and this shyt would tank. i couldn't come back and post about how i missed the boat again, fukk that. so when it was at $34.xx, a put with a $27 strike had a limit price of $0.23 (so $23 for a contract). i bought 20 contracts (in control of 2k shares), so i risked $460. and right now the limit price on a put with a $27 strike is $7.35. so if i exercised that option right now (say pcg is $20) i would be buying 2k shares at $20 share and then selling 2k shares at $27 a share (the writer of that contract is obligated to buy 2k shares from me at that price). we don't personally do that, but that's basically what happens in the background. so 2k shares at $20 per is is a cost of $40,000. my current exercise price is $27 x 2k = $54,000. 54-40 = $14k gross and then subtract my $460 initial cost (what i actually risked) and my net is $13,540. i regret not risking more, but let's say i was wrong and the stock price went the other way ... i was ok with losing $460, well if i let it expire worthless, but i would have probably sold when it was worth half that.
Click to expand...
Good read but I’m lost in translation as a beginner ‍♂️
 
hashmander

hashmander

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anyway right now (11:40 am) i wouldn't buy a PCG put at a $26 strike or anything like that because the amount of money i would have to risk isn't worth the payoff if the stock dropped from its current $24 to $18 like it was yesterday.

a $26 strike has a limit price of $3.60 so that's $3.60x100 = $360 for a contract. say i buy 2 contracts that's $720. the stock drops to $18 and i exercise my options.

$18x200 = $3,600
$26x200 = $5,200
gross = $1,600
minus the purchase price of the options = $720
net = $880

risk $720 to make $880. not my kind of gambling. now if this morning i honestly believe the bottom was lower then i would look closely at a $17 strike with a limit price of $0.50 and risk $500 on 10 contracts, but i don't see this plummeting to $10 or anything like that. so i'll move on from pcg puts. might look into some calls expiring in december. i don't have the best luck with calls in this market (have had better luck watching shyt crash though) so maybe i won't even bother and just pay attention to the news to see who else is ripe to plummet.
 
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4-Rin

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How did he lose all the money? If he shorted energy shouldn't he have made money when PCG fell?
 
theworldismine13

theworldismine13

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4-Rin said:
How did he lose all the money? If he shorted energy shouldn't he have made money when PCG fell?
Click to expand...

from what i gather he was selling calls on natural gas futures, which is a way of shorting and then natural gas went way up this month so the company was then on the hook for covering all the calls they sold
 
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