Vagueness and the Aftermath - A sporadic diary

[celtic]

Ever eat Kebabs or curries?

[GreekStein]

white bread >>> the rest

White bread = bleached, over processed pap.

Get a bit of rough inside you. It's good for your colon.

you've changed...

LOLOLOLOL

[Simon Galloway]

Options starter pack:

Options confer the right, but not the obligation, on the buyer to make or take delivery of an underlying asset (in this case shares) at some point in the future.  (the seller of the option therefore has the corresponding liability.) 
There are call options - the right to buy in the future  and put options - the right to sell in the future.  These options can be cleverly combined to give you the specific investment/hedging profile that you want, but beyond the starter pack, perhaps.

Strike price - the price at which your option will allow you to buy or sell your share at, agreed at the time of buying the option.  Also known as the exercise price (as in the price you get when you choose to exercise your option)
Expiry - the expiration date of your option.  Exercise your right before this date, otherwise the option expires worthless.


An option will have two parts to its value.  Intrinsic and time.  If you want the option to buy shares at £1 (and the shares are currently worth £1.10) no-one in their right mind will sell to you for less than 10p.  This is because you could buy the options and immediately exercise them capturing 10p in value on the spot.  So the options are intrinsically worth 10p.  On top of that, the longer the expiration date, the more compensation the option writer is going to want for it.  So that option for March expiry might actually cost 20p (10p intrinsic + 10p time)  My options exposure wasn't in the equity markets, but the theory is basically the same.

So why trade options?  Tikay already covered it pretty well imo.  The share itself costs £1 to buy and the option costs 20p, so straight away you could buy 5x ~ leverage.  (although with options you wouldn't receive the share dividend as ofc you don't own the share until you exercise your option.)

A certain amount of FPS comes into play in the options market which can largely be ignored.  Probably the 2 most prevalent reasons are:

1) Buy cheap call options as a punt.  If the share price is £1 today and you fancy it to trade much higher, you can select a much higher strike price and a short expiration date.  The longer the expiration date and the lower the strike price, the higher the premium (as the shares have more chance of "getting there" in time.  So if you went for a particularly aggressive strike price of say £3 by March, you could probably pick up the options for a penny.  Most of the time your options expire worthless and you walk away.  However, if your outlook was right and the shares zoom up above £3, you can now exercise your right to call in those options and you now own the shares.  You can choose to sell the shares immediately back into the market to crystallise your profit, or hold on to the shares if you want.

2) Sell covered calls as a hedge/slight gamble.  (Not sure how easy it is for the public to sell options, the broker may want a little bit of proof that you know what you are doing, idk.)  Effectively here, your view would be that the shares that you currently own aren't going anywhere in a hurry.  Now you sell to someone else the right to buy from you.  (This isn't a huge issue as you do actually own the shares, so if the holder exercises against you, you simply hand over your shares, it is a "covered" sell.  Lets's say you sell options for 20p and lo and behold the share price in march is as you predicted, trading a bit lower at 99p.  No-one is going to want to buy from you at £1 when they can buy from the market for 99p.  So, you continue to hold you share-holding, but you trouser the 20p.  So you made 19c profit while the other shareholders made a 1c loss. Rinse and repeat.  After 5 of those, you effectively own free shares, or if you get the market wrong, it's gg and you hand over your shares when called upon to do so.

Hope that helped..

[pokerfan]

have you seen the new google doodle?

No - but I have now, superb!

Google's home page, the most valuable virtual real estate on the planet, is so beautifully uncluttered by noise and tosh. Compare it with Yahoo's home page, the noisiest and most tacky thing imaginable. Another company who are in the mire - Yahoo! Incidentally, the exclamation Mark in "Yahoo!" is, I believe, their official trading name. As in Westward Ho!

More tosh and bollox available  on request.....

Google the word askew, such japes   

[RED-DOG]

Options starter pack:

Options confer the right, but not the obligation, on the buyer to make or take delivery of an underlying asset (in this case shares) at some point in the future.  (the seller of the option therefore has the corresponding liability.) 
There are call options - the right to buy in the future  and put options - the right to sell in the future.  These options can be cleverly combined to give you the specific investment/hedging profile that you want, but beyond the starter pack, perhaps.

Strike price - the price at which your option will allow you to buy or sell your share at, agreed at the time of buying the option.  Also known as the exercise price (as in the price you get when you choose to exercise your option)
Expiry - the expiration date of your option.  Exercise your right before this date, otherwise the option expires worthless.


An option will have two parts to its value.  Intrinsic and time.  If you want the option to buy shares at £1 (and the shares are currently worth £1.10) no-one in their right mind will sell to you for less than 10p.  This is because you could buy the options and immediately exercise them capturing 10p in value on the spot.  So the options are intrinsically worth 10p.  On top of that, the longer the expiration date, the more compensation the option writer is going to want for it.  So that option for March expiry might actually cost 20p (10p intrinsic + 10p time)  My options exposure wasn't in the equity markets, but the theory is basically the same.

So why trade options?  Tikay already covered it pretty well imo.  The share itself costs £1 to buy and the option costs 20p, so straight away you could buy 5x ~ leverage.  (although with options you wouldn't receive the share dividend as ofc you don't own the share until you exercise your option.)

A certain amount of FPS comes into play in the options market which can largely be ignored.  Probably the 2 most prevalent reasons are:

1) Buy cheap call options as a punt.  If the share price is £1 today and you fancy it to trade much higher, you can select a much higher strike price and a short expiration date.  The longer the expiration date and the lower the strike price, the higher the premium (as the shares have more chance of "getting there" in time.  So if you went for a particularly aggressive strike price of say £3 by March, you could probably pick up the options for a penny.  Most of the time your options expire worthless and you walk away.  However, if your outlook was right and the shares zoom up above £3, you can now exercise your right to call in those options and you now own the shares.  You can choose to sell the shares immediately back into the market to crystallise your profit, or hold on to the shares if you want.

2) Sell covered calls as a hedge/slight gamble.  (Not sure how easy it is for the public to sell options, the broker may want a little bit of proof that you know what you are doing, idk.)  Effectively here, your view would be that the shares that you currently own aren't going anywhere in a hurry.  Now you sell to someone else the right to buy from you.  (This isn't a huge issue as you do actually own the shares, so if the holder exercises against you, you simply hand over your shares, it is a "covered" sell.  Lets's say you sell options for 20p and lo and behold the share price in march is as you predicted, trading a bit lower at 99p.  No-one is going to want to buy from you at £1 when they can buy from the market for 99p.  So, you continue to hold you share-holding, but you trouser the 20p.  So you made 19c profit while the other shareholders made a 1c loss. Rinse and repeat.  After 5 of those, you effectively own free shares, or if you get the market wrong, it's gg and you hand over your shares when called upon to do so.

Hope that helped..

Thank you Simon. I think I'm getting close to understanding it now.

[typhoon13]

Tom

The problem with Thomas Cook now is all the bad publicity.

Punters will be shit scared to book a holiday with them through fear of them going bust, thus compounding there losses

through lost bookings.

[RED-DOG]

Tom

The problem with Thomas Cook now is all the bad publicity.

Punters will be shit scared to book a holiday with them through fear of them going bust, thus compounding there losses

through lost bookings.

I'm sure you're right Trev, bad news travels fast.

Now that I've sold my pretend shares at a healthy pretend profit, I don't care if they go to Hell in a hand cart. 

[typhoon13]

Tom

The problem with Thomas Cook now is all the bad publicity.

Punters will be shit scared to book a holiday with them through fear of them going bust, thus compounding there losses

through lost bookings.

I'm sure you're right Trev, bad news travels fast.

Now that I've sold my pretend shares at a healthy pretend profit, I don't care if they go to Hell in a hand cart. 

Always knew you were a smart cookie

[RED-DOG]

Ever eat Kebabs or curries?

Yes. I eat chicken kebabs cut from that rotating elephant's leg thingy.

I like the burned bits best, in a pitta bread with loads of salad, a bit of chilli, and lashings of garlic mayo.

Where are we going with this? I'm not buying you one...

[kinboshi]

have you seen the new google doodle?

No - but I have now, superb!

Google's home page, the most valuable virtual real estate on the planet, is so beautifully uncluttered by noise and tosh. Compare it with Yahoo's home page, the noisiest and most tacky thing imaginable. Another company who are in the mire - Yahoo! Incidentally, the exclamation Mark in "Yahoo!" is, I believe, their official trading name. As in Westward Ho!

More tosh and bollox available  on request.....

I'll call bullshit on quite a lot of that before gatso does.

[tikay]

Tom

The problem with Thomas Cook now is all the bad publicity.

Punters will be shit scared to book a holiday with them through fear of them going bust, thus compounding there losses

through lost bookings.

I'm sure you're right Trev, bad news travels fast.

Now that I've sold my pretend shares at a healthy pretend profit, I don't care if they go to Hell in a hand cart. 

Shame you sold them........

http://www.lse.co.uk/SharePrice.asp?shareprice=TCG

[tikay]

have you seen the new google doodle?

No - but I have now, superb!

Google's home page, the most valuable virtual real estate on the planet, is so beautifully uncluttered by noise and tosh. Compare it with Yahoo's home page, the noisiest and most tacky thing imaginable. Another company who are in the mire - Yahoo! Incidentally, the exclamation Mark in "Yahoo!" is, I believe, their official trading name. As in Westward Ho!

More tosh and bollox available  on request.....

I'll call bullshit on quite a lot of that before gatso does.

Even gatters might struggle to contradict that, pedantry apart.

Gotta love this comparision....

http://uk.yahoo.com/?p=us

http://www.google.co.uk/

[RED-DOG]

Tom

The problem with Thomas Cook now is all the bad publicity.

Punters will be shit scared to book a holiday with them through fear of them going bust, thus compounding there losses

through lost bookings.

I'm sure you're right Trev, bad news travels fast.

Now that I've sold my pretend shares at a healthy pretend profit, I don't care if they go to Hell in a hand cart. 

Shame you sold them........

http://www.lse.co.uk/SharePrice.asp?shareprice=TCG

Sigh...

I blame Trev.

[Bongo]

Even gatters might struggle to contradict that, pedantry apart.

Gotta love this comparision....

http://uk.yahoo.com/?p=us

http://www.google.co.uk/

I think he might be talking about the home page being valuable bit. The only time I ever see it is when someone mentions they've put something different on it.

[kinboshi]

have you seen the new google doodle?

No - but I have now, superb!

Google's home page, the most valuable virtual real estate on the planet, is so beautifully uncluttered by noise and tosh. Compare it with Yahoo's home page, the noisiest and most tacky thing imaginable. Another company who are in the mire - Yahoo! Incidentally, the exclamation Mark in "Yahoo!" is, I believe, their official trading name. As in Westward Ho!

More tosh and bollox available  on request.....

I'll call bullshit on quite a lot of that before gatso does.

Even gatters might struggle to contradict that, pedantry apart.

Gotta love this comparision....

http://uk.yahoo.com/?p=us

http://www.google.co.uk/

Facebook has the most valuable (and visited) page on the web.

Yahoo! made $237 million net profit on a revenue of about $1 billion during the second quarter of the year.  Hardly sounds like a company in the 'mire'.

As an aside with regards to the exclamation mark, Volkwagen have recently brought out a new car called the up!  (notice the lower-case u and the exclamation mark).