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Monday, July 6, 2009

 

How To Multiple Your Investment Dollar? PART 2

*Call options

1) For example,you accumulated 1000 shares of HHH stock over the years. Each share is worth $6, so your portfolio is worth $6000.

One day,your stockbroker review your financial statement.

Report 2: She tells you that people are willing to give you $0.50 a share today for the right to buy 30-60-90day call option at $7 a share.

That could generate $500 in income immediately.

Okay.Here's the picture on the day you sell the option contracts to Tom.


YOU Versus TOM
You own 1000 shares of stock. He wants the option to buy your 1000 shares.

You sell Cwrite) 10 call contracts. He buy 10 call contracts.

You receive $500 in 24hr. He invest $500.

You earn an immediate 8.3%. He waits to see what the stock will do.

In other words,you and Tom are betting against each other. If Tom wins, he pockets the short-term profit. If you win, you pocket the pemium.

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