who plays with the stock market here

[mia06]

hope this helps unit

I am only a painter so forgive me if i make this sound more complicated then it really is

I like the options market as it gives you a lot more bang for your buck

and you can make money in a falling market

eg

if i had brought the stock for 2000 shares xyz a 1.72 and it went up 8 cents

i would of equated to the following me 3440 + broker fee

i sold xyz for 1.80 per share =3600

profit 160 less broker fees in and out.. profit about 60.00


options definition
The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock

so i buy an option for the same stock with a delta of .5
Definition. Options Delta measures the sensitivity of an option's price to a change in the price of the underlying stock

this costs me


$2000/0.15 per call option =13333 options in that stock. now to make things a little easier we round off in thousands and call each 1000 a contract

so for 2000 i get 13 contracts

now with a .5 delta for every 2 cents it goes up the option should go up 1 theoretically

so stock goes up 8 cents my option position goes up 4 cents

result
13000x0.4= $520 less broker fees

so as you can see a lot more bang for your buck

mind you there is pit falls


this is a very basic concept of the option market

there is some really good books in laymans terms about

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Charting

picture worth a thousand words



check the two lines out in the middle of graph

exponential moving average red
moving average blue

note what happens every time these two lines cross each other