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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives -- Ignore unavailable to you. Want to Upgrade?

To: locogringo who wrote (22027)	7/25/2011 2:43:57 PM
From: GROUND ZERO™	1 Recommendation Read Replies (2) \| Respond to of 220267

Those are excellent questions, and I can give you an excellent answer... Let's take the AGQ 215 call I wrote (shorted) for 17.50, that's $1750.00 I took into my account for each 215 call I wrote... this means someone out there was willing to pay 17.50 for a 215 AGQ call in the hope that the stock would rally between now and next month's expiration... the risk is all his... if AGQ rallies to 300, he makes very good money for a small investment, and if AGQ does nothing, then he losses his money... either way, I keep the 1750 profit for myself since I sold it to him... The buyer in this case would first break even if/when AGQ goes to 232.50, that's 215 plus 17.50... so, if AGQ does rally to 300, then I would have to pay him the difference between 232.50 and 300... this means he would profit 6750.00 which comes out of my pocket, but I'm long from 215, so my profit would be 8500.00, that's 1750 more than his profit, the 1750 difference which I keep... so, the market has to rally for the buyer to make money... but for me, I pocket the money as pure profit the same day I write the call no matter what the market does... Clear? If not, just ask... GZ