Thread: Financial News
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Old September 3, 2018, 03:50 PM
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mufi_02 mufi_02 is offline
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Quote:
Originally Posted by G-man
A recent trade I made:

Deutsche bank-

current price: 11.42

strike (exercise price) : 15

expiry : 17 Jan 2020 (1.5 years)

price: 1.00 (per share).

each option contract is 100 shares of the underlying. therefore one options contract @ 1$ is 1 x 100 = 100$

breakeven at expiry (key word - at expiry. i.e. when there is no time value) = 16 (15 strike price + 1 price)

for every dollar DB goes above 15, I make 100% of my return.

say at expiry - Db is at 20$. it moved 25% from 15 to 20 but i made 400% (can sell it for $4 (breakeven at 16))

but say at expiry DB is at 10$ then i lose my full investment (100%). but if you bought shares you would only lose about 10%

buying hundred shares at 15$ would cost me 1500$ but with an option, it cost me 100$ (for one contract)

at expiry i can either sell my option or get delivery of the shares and hold them for longer..

although its bit of a "race against time", it's a much better strategy for the average person on the street who is cash strapped. Can make so many trades with just few thousand buks.

then it's just matter of sit and wait
I’m curious as to why you bought a call option for DB at $15? Any particular reason to be bullish about DB?
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