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Stock call option question?

Let’s say I buy a call expiring 3/20 for $0.30

I have two questions:

1). Is it possible to lose more than $30 on this transaction?

2). Let’s say the stock rises from $4 a share to $6 a share and my strike was at $5. Instead of buying 100 stocks for $600 can I just instead sell the contract instead? 

This way my account can have only $30 in it and have a chance to make over $100, without having to deposit $500 for the purchase. Correct? 

1 Answer

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  • 1 month ago
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    <<<Is it possible to lose more than $30 on this transaction?>>>

    It you do not exercise the option the most you can lose is $30 plus any commission you paid.

    If you exercise the option you will have another $470 at risk which you can lose.

    <<<Let’s say the stock rises from $4 a share to $6 a share and my strike was at $5. Instead of buying 100 stocks for $600 can I just instead sell the contract instead?>>>

    After you have bought an option you can sell it any time unless

    (1) the option has expired

    (2) You have already exercised the option.

    (3) Trading has been suspended on the underlying stock.

    (4) The option is so far out of the money that the bid quote for the option is zero. (For an option $1.00 in the money there is no chance the bid quote will be zero.)

    ----

    I hope you realize the odds of a stock going up 50% in price during the month that you own a call option are remarkably low.

    • Jonathon1 month agoReport

      Yes I realize this! Just wanted to use it for hypotheticals and simplicity. Thanks!

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