By Don Fanstone, Member, Kitchener/Waterloo User Group
Option Blog February 23, 2015
Think of Buying Call Options as a means to buy Optionable stocks for half-price or less. Why pay full price when you can buy for less, much less depending on the delta of the Strike Price?
Buying a Call Option with a delta of .80 will realize a gain of approximately $.80 for each $1.00 the stock rises in price. Options are purchased to increase leverage. Buy more with less. One must remember that it works both ways. You can increase your returns significantly, and you can also increase your losses very quickly.
With options, no dividends are received, it’s capital gain that is being sought.
I encourage all to read Lee Lowell’s book “Get Rich With Options”, go to VV University and watch the Video on Options, and read Dr. DiLiddo’s article in the Views Manager under Special Reports, and finally, take the VV Options Course.
Understand Options Before you begin to trade. There is much to learn.
Trades since Tuesday Feb. 17:
Sold 5 HCG (Home Capital) July 38’s at $6.15, Purchased Feb. 6 @ $8.20.
HCG was purchased on the expectation of a positive EPS report. The company had a moderately acceptable EPS report and increased the dividend. The stock responded negatively.
The MTI is nearing a historical top in Canada, see the one year graph.
Read Dr. DiLiddo’s comment on the US market in Friday, Feb. 20 VIEWS.
This is not a good time to be adding Call Options with the expectation that the markets are going to move up strongly.
DISCLAIMER: Options trading involves risk and is not suitable for everyone. The information contained in this Blog is for education and information purposes only. Example trades should not be considered as recommendations. Options training is strongly recommended before placing any trades. VectorVest offers a basic options course online and occasional intermediate options workshops in Canada each year.