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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (141837)1/18/2002 8:32:39 AM
From: i-node  Read Replies (1) of 1584598
 
Tim, I don't understand fully how calls and puts work but apparently during each expiry period, the combo of all the puts and all the calls yields a strike price range.

It's fairly simple. A call gives you the right to purchase 100 shares of stock at a particular [strike] price between now and expiration. So, if you have a July 17.5 call, that means you can force someone to sell you 100 shares of the underlying stock at $17.50/share anytime between now and the July expiration date. Puts are the opposite (they allow you to force someone to BUY the stock at a fixed price).

Strike prices are set by the exchange. In general, as a stock moves up in price the exchange will open trading on higher strikes; as it moves lower the lower strikes will open.

I use options a lot, but just outright trading of them is akin to casino gambling more than it is investing.
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