I'm going to lay out my understanding of this and see if I have it.
So let's say a company has a $100 30-day call option selling for $5. I buy 5 of these options. I am essentially reserving myself the right to buy 5 shares [EDIT: I now know this is typically 500, except for mini-options] of the stock at $100 (strike) any time in the next 30 days, even if it goes above that price. If I wait until the end of the 30-day period and the share price is below $100, I lose my $25. In order to make money, I have to redeem my options (not sure of the term) when the stock goes above $105, sometime in the next month.
On which parts am I right/wrong?
Submitted March 02, 2016 at 01:18PM by nms1539 http://ift.tt/1oPPtrN
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