Option Trading Levels Does Not Make Sense.

[Option Trading Levels Does Not Make Sense.]

I have 401k transferred to brokerage account recently however the brokerage only allows level 1 trading options which is

- covered calls

-cash-secured short puts

-protected puts

 

However level 2 is not allowed however, level 1 tradings for me is much riskier and potentially lose lots of money than level 2. Why do they structure like that? I am kinda frustrated

 

buy options

buy puts

[Advantages and Disadvantages of Stock Options Trading.]

Let me explain you in simple words, Suppose you have bought the Apple's one share 10 years ago at $10 and you sold the same after 5 years down the line at $20. You made a profit and its natural that somebody has bought the same from you at $20 (5 years ago). Now the current market price is $30, then he can sell the same and can make a profit. In this sense wealth is created in stock market, not in Derivative market but it depends upon the company's performance and how much income they are generating and their growth prospects.

'Hi Larry, I understand your point. However I am making much more broader view based on the fact that no company grows forever, every company will go up and down. Lets stay in that respect, stock follows the pattern. No stock will go up forever, it will eventually go down. There are winners on the upward motion and losers in the downward motion. In that sense it is also zero sum. There is really not a wealth created here. No coin is being printed, no tangible product is being created when stock price goes up. It is just price is going up like a product. Just like a gas price. You cant say the wealth is being created when the price goes up. Sellers of gas gain and take advantage by of higher gas with higher revenue where a consumer suffer by paying more. and vice versa when the gas price falls down.

[Advantages and Disadvantages of Stock Options Trading.]

Zero sum basically means someone is losing that is why the other one is winning. In simple words, options (Derivative trading) do not create wealth where as stock (trading in cash market) creates wealth for all the investor.

 

Hmm I am not sure about the stock then. Rise in stock price does not necessarily create wealth specially tangible one. Specially when it rises on speculation and bubble is burst. It surely does have losers and winners both. May be not as clear cut as options but still...

[Advantages and Disadvantages of Stock Options Trading.]

when you zero sum - if you are constantly winning.

Did you mean your net is zero or someone else is losing as a result of your win? Thanks,

[Exercising Option Funds Requirement?]

thanks for help. I also posted the question on another forum and got the same reply. . Thanks!

[Tech Earnings Trap: Beware of Implied Vol]

I started sseriously trading just about 4-5 months ago. I used a very good book on technicality, which is named "option made easy". Prior to that I ahve been just trading stocks on and off for about 6 years. Man, in just last 2 months I hit two jackpots, I almost doubled my cash and made about 30k$. However I did a very good homework on this though.

[Exercising Option Funds Requirement?]

Is this forum a ghost town or i am asking stupid question???

[Exercising Option Funds Requirement?]

I have a scottrade account and I was told that in order to exercise an option I need to have a fund available to purchase the stocks in order to exercise? And in case of exercising before an expieration date I need to call them over the phone to do so.

 

For case, where I would like to keep the stock after buying at strike, that is understandable to have the fund available.

 

However, If I would like to exercise by buying at strike and selling at market immediately, do I still need funds available?

 

THis is because I have couple of high-priced stock options, including AAPL for which I am not exercising just buying and selling contract itself.

Thanks!

[Question About Unbalanced Straddle]

let s say stock i am eyeing for straddle is quit bullish. As a result calls on the same expiration dates with similar strike prizes tend to be much more expensive sometimes twice as much as the puts on the same expiration date. Now if I would like to put a straddle on this should I buy a same number of calls and puts contracts resulting in twice more expensive calls purchased as puts or different number of calls and puts contracts so that the money amount on both calls and puts would equal?

 

Thanks,

[RIMM Stock Short Squeeze]

Currently RIMM is inching upward crazy largely due to short squeeze. IF I see a low of open interest put call on option dec 2012 jan 2013 options list, does that means more puts to be squeezed too?