Stock Options, and why you should care about them.

[TheAlmightyDada]

Intro

I would like to talk about Stock Options and what they are, the reason I would like to do this is a little wishy washy, so bear with me.

There is something I dislike about this forum, it’s the amount of people that come here looking for a quick easy buck, rather than a way to substantially grow their net worth through building a sustainable long term online business. They come here looking for a scheme or a scam, or an exploit.

I think that the reason this happens is because a lot of the people that join the forum are young, so this is understandable. While I can understand your point of view, it is clear that you are not acting in your best interests.

Have a quick look around the forum, the most active members, the most successful members all have sustainable businesses.

So, something sustainable is what you should be aiming for but what the fuck does that have to do with Stock Options?

Well, whenever I have spoken to somebody about my concerns – the strongest objection is always “but Business is hard”. For example, when somebody recently lost access to their Paypal account because they were using it for business when it was a personal account. I asked why they didn’t set up a business account. Their response was that it was too difficult to set up a business and therefore a business paypal.

So, my overriding goal is to see this fear of business eradicated from the forum entirely. There are already people who have taken massive strides forward with this respect. I’m looking at @Sherb & @t0mmy.

So, before we begin – let’s agree that if you can understand something as supposedly complex as Stock Options, then you can do something as simple as set up a business bank account.

Stock Options.

Let’s start with a share in a company.

What's a share? It’s a little chunk of a company. So, if you are following Sherb’s post, you will know that he owns 14 shares in Apple. Fine, so what does that mean?

It’s the same as this:

· I buy a cake.

· @Asif WILSON Khan , @MatthewGraham , @MisterF and @Apricot all gather around me because they want some of the chocolatey goodness.

· I cut the cake in twelve pieces, and hand it out in the following way:

a. Asif gets a piece

b. Matthew gets a piece.

c. MisterF gets 3 pieces.

d. Apricot gets 2 pieces.

e. I keep 5 pieces.

So Asif owns One Share of my cake or 8%. Whereas I own 42%.

So, big companies sell off ownership of themselves – this means that Sherb is an owner of Apple. With the shares he holds, he owns about 0.00000024% of Apple. That means if you work for Apple, he is that much your boss. Interesting, right?

See, it’s not complicated. So you understand shares… On to Options.

A stock option is a piece of paper, that gives you the right to buy shares at a particular price at some fixed point in the future. Great, what the fuck does that mean?

Put it this way, Apple’s stock price is currently around $160. Let’s say I have one of those shares, and we have the following conversation:

Me: “Hey, would you like to buy this share off me?”

You: “Yes”

Me: “Well, it’s not for sale”

You: “Fuck you then”

Me: “But, I’ll give you the option to buy it in 1 years time, for $165 – and for this option, I’ll charge you $40.”

You like this idea, so you take me up on the offer and pay me $40 now because you think that next year, the stock price will be $300, so of course your going to want to buy it off me for $165.

Next year comes around and you were right, the stock price has jumped up to $300 – so you come and give me $165 for my share, and I have to hand it over to you. You will probably imidiately sell it, resulting in a tidy $95 profit.

There… It’s that simple.

If you have any questions, ask away… I might not get to them until the weekend though.

You now understand more than 90% of small business owners I've ever come across, and you're telling me that you cannot set up a business account?


………………………………………………………………………………………………………………………

Mods, I realise this is an IM forum and not an Investing forum. If this doesn’t belong, I apologise.

 

[MatthewGraham]

There is something I dislike about this forum, it’s the amount of people that come here looking for a quick easy buck, rather than a way to substantially grow their net worth through building a sustainable long term online business. They come here looking for a scheme or a scam, or an exploit.

Remember that time that @Sherb was like "Bitcoin is a bubble" and then everyone was like "LMAO" and then @Sherb was like "Bitcoin is a bubble v2" and then everyone was like "non-germane" and then @Sherb was like "Bitcoin is a bubble v3" and then everyone was like "LMAO" and then @Sherb was like "fuck the crypto forum I'm going to stop posting here" and the Bitcoin crashed?

I think that the reason this happens is because a lot of the people that join the forum are young, so this is understandable.

Shout out to all of the old people who fall for get rich quick schemes, too.

Have a quick look around the forum, the most active members, the most successful members all have sustainable businesses.

Agreed with this.

When people ask what they should do to get started in IM, the default answer I give is that they should start selling services directly to clients--fuck making some fancy CPA PPC LMAO PBN domain passive custom income SEO SERP ranking project--sell labor to other humans. Once you have a client base and have built up capital, scale your services, start hiring people to help render the services for you, build out a domain to help market yourself, and so on.

Stock stock stocks

Stocks seems like a reasonable way to have capital tied up in semi-liquid assets that will appreciate more than a checking/savings account. I know that @Sherb is sexually aroused by reliable, diversified stock portfolios.

It's also important to take https://en.wikipedia.org/wiki/Opportunity_cost into account. If you have $100k to invest, a portfolio that will make a yearly return of 6.7% is great; having a VA build out thousands pre-built PBNs that you can sell for double the cost of labor is better (potentially; it's an example, you fucks; pls no flame war).

Instead of investing in stocks, spending that same money hiring VAs, contractors, and/or employees to expand/grow your business ventures can be a more optimal use of your capital.

 

[Deleted member 657006]

Intro

I would like to talk about Stock Options and what they are, the reason I would like to do this is a little wishy washy, so bear with me.

There is something I dislike about this forum, it’s the amount of people that come here looking for a quick easy buck, rather than a way to substantially grow their net worth through building a sustainable long term online business. They come here looking for a scheme or a scam, or an exploit.

I think that the reason this happens is because a lot of the people that join the forum are young, so this is understandable. While I can understand your point of view, it is clear that you are not acting in your best interests.

Have a quick look around the forum, the most active members, the most successful members all have sustainable businesses.

So, something sustainable is what you should be aiming for but what the fuck does that have to do with Stock Options?

Well, whenever I have spoken to somebody about my concerns – the strongest objection is always “but Business is hard”. For example, when somebody recently lost access to their Paypal account because they were using it for business when it was a personal account. I asked why they didn’t set up a business account. Their response was that it was too difficult to set up a business and therefore a business paypal.

So, my overriding goal is to see this fear of business eradicated from the forum entirely. There are already people who have taken massive strides forward with this respect. I’m looking at @Sherb & @t0mmy.

So, before we begin – let’s agree that if you can understand something as supposedly complex as Stock Options, then you can do something as simple as set up a business bank account.

Stock Options.

Let’s start with a share in a company.

What's a share? It’s a little chunk of a company. So, if you are following Sherb’s post, you will know that he owns 14 shares in Apple. Fine, so what does that mean?

It’s the same as this:

· I buy a cake.

· @Asif WILSON Khan , @MatthewGraham , @MisterF and @Apricot all gather around me because they want some of the chocolatey goodness.

· I cut the cake in twelve pieces, and hand it out in the following way:

a. Asif gets a piece

b. Matthew gets a piece.

c. MisterF gets 3 pieces.

d. Apricot gets 2 pieces.

e. I keep 5 pieces.

So Asif owns One Share of my cake or 8%. Whereas I own 42%.

So, big companies sell off ownership of themselves – this means that Sherb is an owner of Apple. With the shares he holds, he owns about 0.00000024% of Apple. That means if you work for Apple, he is that much your boss. Interesting, right?

See, it’s not complicated. So you understand shares… On to Options.

A stock option is a piece of paper, that gives you the right to buy shares at a particular price at some fixed point in the future. Great, what the fuck does that mean?

Put it this way, Apple’s stock price is currently around $160. Let’s say I have one of those shares, and we have the following conversation:

Me: “Hey, would you like to buy this share off me?”

You: “Yes”

Me: “Well, it’s not for sale”

You: “Fuck you then”

Me: “But, I’ll give you the option to buy it in 1 years time, for $165 – and for this option, I’ll charge you $40.”

You like this idea, so you take me up on the offer and pay me $40 now because you think that next year, the stock price will be $300, so of course your going to want to buy it off me for $165.

Next year comes around and you were right, the stock price has jumped up to $300 – so you come and give me $165 for my share, and I have to hand it over to you. You will probably imidiately sell it, resulting in a tidy $95 profit.

There… It’s that simple.

If you have any questions, ask away… I might not get to them until the weekend though.

You now understand more than 90% of small business owners I've ever come across, and you're telling me that you cannot set up a business account?


………………………………………………………………………………………………………………………

Mods, I realise this is an IM forum and not an Investing forum. If this doesn’t belong, I apologise.

everythink you say is corrrct , but you still got to remember your in a blackhat forum and that mean a lot diffrent things to diffrent ppl .

for example the quistion .

do i need to pay tax
(( if your asking that of course you need to understand business before even touching im ))

next quistion.

i can not get my money out of paypal
(( if you can earn it then join a bank from your own country, shop trying to fraud your country tax man ))

a lot off people miss understand that we are on a blackhat forum but we are not into fraud internet marketing is a way to earn money and blackhat is only black becouse of usring bots and statigy to gain money quicker then white hat .

we do not tolerate hacking full stop or fraud full stop.

we dont mind useing stelth accounts but we only use them to increase speed to get better profits fast and we pay our tax on our earnings .

when eventually all users understand that then maybe there relise internet marketing is a normal job just online .

ps.
i would be amazed that anybody in the im feild didnt no what a business account was....

there acting igroint or dum just to get away with tax but it dont work .

 

[jazzc]

Instead of investing in stocks, spending that same money hiring VAs, contractors, and/or employees to expand/grow your business ventures can be a more optimal use of your capital.

The difference is that in this scenario, you're not only investing capital, you're investing your labor as well.

 

[Deleted member 657006]

you have not exsplained the % mean in owning a business only thing i didnt see .

a person that own a business has to own 51% in shares to be the full owner .

if the owner now sell another 10% sheres he becomes a partner of the business and not a owner .

a business can be owned amoung many as partners .

a silent partener is a person that got shares in a business but does not work within the buisiness , just a investor .

 

[Deleted member 657006]

1 more thing i want to point out .

if you register a business , anythink earnt is the business money .

you work for your own business but you need to be self employed .(( owner))

the business it self has it accounts sorted and then pay who ever it has to.

and then staff pay there own tax or the business can pay it for them.

in the uk it works this way ...

also in the uk any body with 1 staff has to pay the same amount of pension as the person paying .

if they want to contubute £10 each month towards there pension then the business has to also contubute the same .

 

[MatthewGraham]

The difference is that in this scenario, you're not only investing capital, you're investing your labor as well.

Of course -- the speed that you can work can limit how much can be invested into new ventures.

Ideally, figure out how to invest as much of your capital into the highest-return options as possible; put other capital into investments that are less labor-intensive.

 

[Wilson Grant Fisk]

I didn't get my cake ... I WANT MY CAKE!

 

[blogzandstuff]

Intro

I would like to talk about Stock Options and what they are, the reason I would like to do this is a little wishy washy, so bear with me.

There is something I dislike about this forum, it’s the amount of people that come here looking for a quick easy buck, rather than a way to substantially grow their net worth through building a sustainable long term online business. They come here looking for a scheme or a scam, or an exploit.

I think that the reason this happens is because a lot of the people that join the forum are young, so this is understandable. While I can understand your point of view, it is clear that you are not acting in your best interests.

Have a quick look around the forum, the most active members, the most successful members all have sustainable businesses.

So, something sustainable is what you should be aiming for but what the fuck does that have to do with Stock Options?

Well, whenever I have spoken to somebody about my concerns – the strongest objection is always “but Business is hard”. For example, when somebody recently lost access to their Paypal account because they were using it for business when it was a personal account. I asked why they didn’t set up a business account. Their response was that it was too difficult to set up a business and therefore a business paypal.

So, my overriding goal is to see this fear of business eradicated from the forum entirely. There are already people who have taken massive strides forward with this respect. I’m looking at @Sherb & @t0mmy.

So, before we begin – let’s agree that if you can understand something as supposedly complex as Stock Options, then you can do something as simple as set up a business bank account.

Stock Options.

Let’s start with a share in a company.

What's a share? It’s a little chunk of a company. So, if you are following Sherb’s post, you will know that he owns 14 shares in Apple. Fine, so what does that mean?

It’s the same as this:

· I buy a cake.

· @Asif WILSON Khan , @MatthewGraham , @MisterF and @Apricot all gather around me because they want some of the chocolatey goodness.

· I cut the cake in twelve pieces, and hand it out in the following way:

a. Asif gets a piece

b. Matthew gets a piece.

c. MisterF gets 3 pieces.

d. Apricot gets 2 pieces.

e. I keep 5 pieces.

So Asif owns One Share of my cake or 8%. Whereas I own 42%.

So, big companies sell off ownership of themselves – this means that Sherb is an owner of Apple. With the shares he holds, he owns about 0.00000024% of Apple. That means if you work for Apple, he is that much your boss. Interesting, right?

See, it’s not complicated. So you understand shares… On to Options.

A stock option is a piece of paper, that gives you the right to buy shares at a particular price at some fixed point in the future. Great, what the fuck does that mean?

Put it this way, Apple’s stock price is currently around $160. Let’s say I have one of those shares, and we have the following conversation:

Me: “Hey, would you like to buy this share off me?”

You: “Yes”

Me: “Well, it’s not for sale”

You: “Fuck you then”

Me: “But, I’ll give you the option to buy it in 1 years time, for $165 – and for this option, I’ll charge you $40.”

You like this idea, so you take me up on the offer and pay me $40 now because you think that next year, the stock price will be $300, so of course your going to want to buy it off me for $165.

Next year comes around and you were right, the stock price has jumped up to $300 – so you come and give me $165 for my share, and I have to hand it over to you. You will probably imidiately sell it, resulting in a tidy $95 profit.

There… It’s that simple.

If you have any questions, ask away… I might not get to them until the weekend though.

You now understand more than 90% of small business owners I've ever come across, and you're telling me that you cannot set up a business account?


………………………………………………………………………………………………………………………

Mods, I realise this is an IM forum and not an Investing forum. If this doesn’t belong, I apologise.

A pleasure to read, you know your stuff. I prefer slow and steady, that's why I have been in business for 30 years. This does belong in my opinion as it's to do with money. If crypto currency is on the forum why not this?

 

[Deleted member 36594]

I don't know why no one pointed out the most crucial thing about option trading: time decay (theta)

Let me recall the knowledge I've learnt in college.... Say if you buy a call or put option and it expires in 30 day, the value decays as it nears expiration date. The value deteriorates exponentially. Why do you think if you buy a call/put option and it doesn't go the way you want (call option - you want the underlying asset price to go up; put option - you want the underlying asset price to go down) you can just let it expire and not vice-versa? If it is that good, everyone would be doing option trading. Haha!

So when people say you can earn a lot from options, they've either never traded options or haven't experience time decay before, or truly are professional option traders which uses butterfly, condor strategy, and whatever.

The only way you can avoid time decay in options trading is being the 'writer'. That is, you receive the premium as you issue call/put options to the market. Problem is... say if the market goes against what you predicted (you issue a put option hoping the price will go against the person buying it - that is price of the underlying asset to go up; or you issue a call option hoping the price of the underlying asset to go down) AND the person who bought the option exercises it, you're done for because you need to issue that underlying asset (say 1 call/put option of Facebook stock - that is 100 stock of FB, at the agreed price of the option writing). So if you're a naked option writer (that is, writing options without owning the underlying asset) you're playing with fire here.

An example: You write a call option of Facebook at its price of $180. You hope the price will go down so the buyer of the option will let it expire, thus you keep all the premium (say $500). Unfortunately for you Facebook stock went up to $200 and the buyer of the option exercises it. You need to issue 100 Facebook stocks at the price of $180 to the buyer of the option. So if you're a naked option writer (who wrote the option without owning Facebook stocks) you need to buy it at the market place at $200 ($200 * 100 = $20,000) while your buyer of the option only pays you $18000 ($180 * 100 stocks). Factoring in the premium you've gotten, you still lose out $1500 and you need to find that excess $18,500 to buy and issue the underlying asset.

Trading options can be profitable IF the market is very volatile and it really depends on luck. Whether is it monthly or weekly option. So say I buy a call option on Facebook stock that expires on March (Friday, 3rd week of the month) and currently it is February.... and suddenly Facebook has some sudden good news and the stock price soars the next day. Now if I were to sell my option I would get a good profit (but I remember there's a cap or something). But if it just slowly goes up and down and sideways till it is mid March and it goes up and I sell it, it wouldn't fetch a good price as the first scenario due to time decay.

And if I remember right, the profits aren't that much as people claim it to be. If you're the writer of options, you would only bring in about few hundred of dollars per option that expires within a month. If you were to write options that expires further (6 months or more, high risk for you, thus more yield) it could fetch several thousands of dollars. But if you're the buyer of options, I think the profit is $100-200 per option depending on all the theta, vega, beta, whatever tata.

P.S: Dad and brother trades all those financial derivatives and stuffs. And learnt technical analysis and other investment stuffs in college as I pick up financial investments. And in case if anyone is wondering... yes, I've traded options before. And that was many years back when I first learned about it in college. I was intrigued by it because, in theory, it seems profitable so I tried it. Problem is if your capital is small, so is your buying power. And it is really a waiting game. You can wait for weeks or even months. Unfortunately, I'm not really a person with that kind of patience. And if you have little buying power, so is your profits.

 

[Deleted member 36594]

excess $18,500 to buy and issue the underlying asset.

Correction: excess $19,500 to buy and issue the underlying asset in the first place when the buyer of the option exercises it.

 

[Sephrata]

1 more thing i want to point out .

You've pointed out a lot of things here, but I don't think anything you've written is relevant to this thread...

also in the uk any body with 1 staff has to pay the same amount of pension as the person paying .

Remember what I told you before?

 

[blogzandstuff]

everythink you say is corrrct , but you still got to remember your in a blackhat forum and that mean a lot diffrent things to diffrent ppl .

for example the quistion .

do i need to pay tax
(( if your asking that of course you need to understand business before even touching im ))

next quistion.

i can not get my money out of paypal
(( if you can earn it then join a bank from your own country, shop trying to fraud your country tax man ))

a lot off people miss understand that we are on a blackhat forum but we are not into fraud internet marketing is a way to earn money and blackhat is only black becouse of usring bots and statigy to gain money quicker then white hat .

we do not tolerate hacking full stop or fraud full stop.

we dont mind useing stelth accounts but we only use them to increase speed to get better profits fast and we pay our tax on our earnings .

when eventually all users understand that then maybe there relise internet marketing is a normal job just online .

ps.
i would be amazed that anybody in the im feild didnt no what a business account was....

there acting igroint or dum just to get away with tax but it dont work .

Let's hope your business isn't article writing lol! You could put grammarly down as a business expense

 

[Sephrata]

Trading options can be profitable IF the market is very volatile and it really depends on luck.

Remember there's also two sides to every trade.

There will be a lot of trading accounts wiped out over the last week or so as people ignored implied vol and theta. Those inverse ETPs that were net short vega on VIX have been well and truly taken to the cleaners.

 

[Deleted member 36594]

Remember there's also two sides to every trade.

There will be a lot of trading accounts wiped out over the last week or so as people ignored implied vol and theta. Those inverse ETPs that were net short vega on VIX have been well and truly taken to the cleaners.

True, that's why I said it really depends on 'luck'. The market can behave irrationally and unexpected events can occur any moment.

Even in regulated markets, algorithm trading bots can create flash crashes. I think there was another a few years back? Although many believe the sudden market sell-off was triggered by the likelihood of FED increasing interest rates, there has been speculation that it shouldn't have created that kind of impact. And even so, like investors always say, such news have already been factored in a long time ago.

Also, there are always contrarian investors who would short, write calls, or buy put options in a rising market thinking it will fall. Those who did so would have profited a lot.

Well... like the saying goes: high risk, high yield.

 

[darulez]

Yeah.
It's called gambling for one

The others invest. And they know stuff like MSCI ETF SP500 in and out

And modern portfolio theories

 

[Sherb]

Awesome thread, @TheAlmightyDada! I would lose my ass on options trading without spending some serious time researching.

I'm still in the buying-up process for standard non-index stocks. I grabbed another share of Amazon yesterday morning thinking it was a smart call. Then it fell 4%. I also grabbed four more shares of Tesla at $337 because it dropped $10. Then it fell another $20 after that. Literally down 8% yesterday for my overall Robinhood portfolio, and I'm only in large, large cap stocks.

 

[jazzc]

I'm still in the buying-up process for standard non-index stocks. I grabbed another share of Amazon yesterday morning thinking it was a smart call. Then it fell 4%. I also grabbed four more shares of Tesla at $337 because it dropped $10. Then it fell another $20 after that. Literally down 8% yesterday for my overall Robinhood portfolio, and I'm only in large, large cap stocks.

Next time you decide to buy something, scrap that and take a short position instead

 

[Sherb]

Next time you decide to buy something, scrap that and take a short position instead

Amazon down $13 a share this morning. Tesla down $9 a share (almost 3%) already. Between those and Netflix, I'm down $100 today. Dropped $700 yesterday. Holding out for a solid February regardless. HODL.

 

[∂αякѕтαя]

Awesome thread, @TheAlmightyDada! I would lose my ass on options trading without spending some serious time researching.

I'm still in the buying-up process for standard non-index stocks. I grabbed another share of Amazon yesterday morning thinking it was a smart call. Then it fell 4%. I also grabbed four more shares of Tesla at $337 because it dropped $10. Then it fell another $20 after that. Literally down 8% yesterday for my overall Robinhood portfolio, and I'm only in large, large cap stocks.

Stock bubble burst?