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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: Jill who wrote (442)	12/31/1999 11:25:00 AM
From: StockHawk	Read Replies (2) \| Respond to of 8096

>>Can someone explain what is eluding me? << While it's often a poor idea to try and explain what someone else is saying, I'll give it a try. I don't think anything is eluding you. It is a matter of how you select your investment. When you wish to buy options do you start with say 1. I have $5000 to invest and I wish to invest all of it, or do you say 2. I would like to take a position in this stock that will allow me to control 1000 shares. I think Frank is using the second method. Just making up some numbers, if GMST is trading at $70 and you buy a Feb $50 option at $22 and the stock runs to $100 you have made $28 (127%). If instead you bought a Feb $75 for $10 you would have made $15 (150%) a higher percentage, but less dollars. Now, of course, since you were only paying $10 per option, instead of $22 you could have bought twice as many and then made more dollars along with a higher percentage, but then you get back to how much risk you wish to take. If the stock stayed flat - and you held until expiration you would lose the entire $10 on the OTM option but still have $20 of the $22 on the DIM and be ready to play again. So did this example help or just add to the confusion? <g> StockHawk