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The appeal of buying call options is that they drastically magnify a trader’s profits, as compared to owning the stock directly. With the same initial investment of $200, a trader could buy 10 ...
Name. Purpose. How it Works. Benefits. Risks. Covered Calls. Income. Investor owns underlying stocks and sells call options allowing buyer to purchase the shares at set strike price by expiration ...
Options are contracts that give their owner the right, but not the obligation, to buy or sell an underlying asset such as a stock. Options come with an expiration date, after which the option ...
The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. [1] On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exchanges (CME, NYMEX, and COMEX) now operate as designated contract markets (DCM) of the CME Group.
In essence, you are synthetically loaning out your stock and collecting the hard to borrow premium. If the underlying stock is general collateral, the repo rate is reflected in the futures buy price being higher than the stock sale price (a so-called contango). In essence, you are monetizing your stocks and are paying interest on the sale proceeds.
A trader who expects a stock's price to increase can buy a call option to purchase the stock at a fixed price (strike price) at a later date, rather than purchase the stock outright. The cash outlay on the option is the premium. The trader would have no obligation to buy the stock, but only has the right to do so on or before the expiration date.
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