Options are a great way to lose money, unless you're the one selling them

The seller of options wins 95% of the time, writes Peter Hodson. Read more.

Selling a covered call gives you a premium and gives another investor the “option” to buy your stock at a fixed defined price, at a fixed expiry date in the future. For example, an option seller might get $2 to sell a $50 September call option on XYZ when XYZ shares are trading at $45. If XYZ goes above $50 before the expiry date , then the seller is obligated to sell their stock at $50. If XYZ fails to hit $50, he keeps his stock. Either way, the option seller keeps the $2 premium .

Why then, does the options market continue to exist? Well, there is of course a legitimate hedging need for options. But the main reason is … greed. When an options buyer is right, the leverage is miraculous. One can buy a short-term $0.50 option, at times, and see it go to $10, once in a while. Quick fortunes can be made if the market moves quickly and sharply. But, that is not the norm.

We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

financialpost /  🏆 7. in CA

South Africa Latest News, South Africa Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

City of Terrace toughens stance on Enbridge gas pipeline proposal - Terrace StandardCity first wants a revenue sharing agreement with the province and money from Enbridge
Read more »

Tuesday's Voyageurs Cup loss a nightmare for TFC coach Bradley in more ways than oneOther than a player suffering a major injury, Tuesday night’s Canadian Championship final at BC Place had the worst possible outcome for Toronto FC and coach…
Read more »

Whitby man aims to be first person with disabilities to paddleboard across Great LakesA Whitby man is making waves as he becomes the first man with disabilities to cross the five Great Lakes on a paddleboard. Mike Shoreman has already done Lak
Read more »

Disabled paddleboarder crosses Lake Michigan; Lake Ontario nextIn terms of Great Lakes, it’s four down, one to go for Mike Shoreman, a disabled paddler from Whitby, Ont.
Read more »

NFL+ subscription service launchesNFL+ streaming service launched on Monday, providing a direct\u002Dto\u002Dconsumer option for NFL programming and a viewing option for in\u002Dmarket and primetime…
Read more »