| If you are an options trader then you probably | | | | back for less money than you sold it or you let it |
| know this statistic. 80% of all options bought | | | | expire worthless. As long as the Google stock |
| expire worthless. | | | | closes below $500 by the third Friday of August |
| Which means that if you just sold options then | | | | then you can keep your $2000. |
| 80% of the time you would have winners and | | | | The danger in your position though is that Google |
| 20% of the time you would have losers. | | | | might be $450 one day before the option expires |
| Just imagine that. As long as you win more than | | | | (and you are sitting there all smug) and then |
| you lose then you could realise the dream and | | | | Google announce that it being bought by |
| retire as a professional trader. | | | | Microsoft!! The share leaps to $700 and you are |
| Is it as simple as that? In a word yes. It is that | | | | looking at a HUGE loss. Going on the basis that |
| simple. That does not mean however that it is | | | | you don't actually hold any Google stock you will |
| easy. | | | | need to buy 1000 shares of Google at $700 |
| You see selling options is a very risky thing to do | | | | ($70,000) and sell it to the owner of the call you |
| if you don't know what you are doing. When you | | | | sold at $500 per share ($50,000). |
| sell an option you receive the premium for which | | | | Your loss therefore is a whopping $18,000 |
| the option was sold. If you sell a GOOG 500 Aug | | | | ($70,000 - $50,000 - $2,000 -your option |
| Call for $2.00 then that means for every contract | | | | premium you got a the beginning when you sold |
| you sold you would receive $200. | | | | the option-). |
| Lets say you sold 10 contracts of our GOOG call | | | | So you still fancy selling options as an investment |
| above. That would mean you would receive into | | | | strategy? The fact is if you just sell options then |
| your trading account $2000 (100 x $2). Now to | | | | you are opening yourself up for a strategy with |
| make a profit on this position you will need to | | | | limited reward and unlimited risk. And no sensible |
| either close the position by buying the GOOG call | | | | trader should be doing that. |