Well, EC my fine feathered friend, nice to see you back and are still alive. Lets examine your statement:
And let me preface it by saying usually I want wts deep in the money or with lots of time, but this looks like a special gold breakout case---still, here is the logic.
Also, wts are very dangerous until you learn how to use them. I would recommend newbies to use the K B wts good until 2011.
E Carters: "ah yes! leverage against loss. Of course if gold falls, you lose ALL your option money, whereas you only lose 10% of your underlying security value."
Same difference, right-lol?
Lets say you have $100,000 of gold stocks like Kinross-lol. Or you have 18,0000 wts controlling $100,000 of Kinross at the money. I only paid .25 or so, but lets say you paid .45 or $8,000 for the 18,000 wts. Good until dec 5, striek $15.
Now lets say gold falls well, $75, I will bet your $100,000 worth of Kinross will fall further than $8,000 (the limit of your loss). But let's say gold fall $200, then Kinross will fall much further than your $8,000.
But with the wts you are limited to the $8,000 loss and with more time, less still.
Still wts are very dangerous until you fully understand them and that can take a long time, so be careful.
And that especially mean you EC-lol. |
