Presentation on theme: "THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION DISCUSSED DURING HAWKTRADE MEETINGS."— Presentation transcript:
THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION DISCUSSED DURING HAWKTRADE MEETINGS. Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Investing in any financial instruments does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing. HAWKTRADE and its members do not bear any responsibility for losses or gains made by members trading on their personal accounts based on analysis from HAWKTRADE meetings.
Options are a financial contract that allows an investor to speculate in assets that he/she doesn’t own. Options can be used to predict the direction of stocks, currencies, commodities, or stock indexes as a whole.
Strike Price- The price the trader thinks the stock will go to, either above, below, or at the current market price. Expiration date- How long the option contract is good for; anywhere between a week to over a year.
Options are priced based on their intrinsic value (how close to the strike price they are) plus their time value (How long do they have until they expire) The farther away the expiration date the more expensive the time value aspect is. The farther away (either up or down) the strike price is from the current (spot) price the less it costs b/c the stock is less likely to move that much before the expiration date.
1 Stock = With a stock, you only have two choices, you can buy it (hope it goes up) Or short sell, (hope it goes down)
Options = With an option, you can buy the right to own just the half of the stock you think will happen next, It costs much less than actually buying the entire stock.
1. Buy a Call (Bullish on stock) 2. Buy a Put (Bearish on Stock) 3. Sell a Call (Neutral/Bearish on stock) 4. Sell a Put (Neutral/Bullish on stock) There are 4 positions you can take with options:
A call option is a contract that gives the holder the right, but not the obligation, to purchase shares of the underlying stock. Use this strategy when you think the stock will go up. One options contract equals 100 shares of the underlying stock. If option costs $1.50, then it is equal to $1.50 * 100, or $150
XYZ Company is trading at $23 You believe the stock could rally to $27 by December so you buy the Dec 25 call option for $1.00, or 100 bucks. Gives you the right to buy the stock at $25 any time up until December expiration.
At Expiration: ▪ If the stock finishes below $25 the call expires worthless ▪ If the stock finishes at $25 the call expires worthless ▪ If the stock finishes above $25 the call is worth the stock price minus 25.
At Expiration if stock is at $27 The call option is worth $2 ▪ 27-25=2 ▪ You buy 100 shares at $25 and would then be able to sell those 100 shares at the current market price of $27 Profit would be $1.00($2 gained from stock - $1 option cost.) 100% gain on a 17% gain in the stock!
Stock is trading at $23 1 Call option with a strike price of $25 costs $1, or ($100) to buy. Max loss= $100, the cost of the option Max Profit= Unlimited Stock Price (spot) Profit Loss Buying a Call Option
Rather than pay $2500 to buy the 100 shares, you could at any time before expiration offset your position by taking the opposite position. Say the stock went to $27 on Nov 15 th, and the option price went up from $1.00 to $2.00. Simply sell the option for $2 and make your $100 profit now instead of waiting until Dec. 21 st.
About 30% of options expire worthless About 10% of options are actually exercised (Stock is actually bought or sold) About 60% of option positions are offset Easier, quicker, and cheaper than waiting until expiration.
Home sales up GDP numbers released Apple has negative earnings surprise and lowers expectations Microsoft releases windows 8 and tablet Facebook up huge after seeing a 22% increase in mobile revenue.
Apple’s Earnings Disappoint Fri 26 Oct 12 | 10:03 AM ET
iPhone strong, iPad weak Only 9 selling days of iPhone 5 last quarter Outlook disappoints EPS estimates for next quarter almost $4 lower than expected
1% Down 3.5% midday on Friday
iPad Mini Tue 23 Oct 12 | 03:20 PM ET
Will Apple continue to see earnings drop as they lose market share? Will the iPad Mini cannibalize other segments or create a new market? Can Apple create the next big thing?
Q3 GDP Fri 26 Oct 12 | 08:32 AM ET
Real GDP Growth – 2% annual rate Expected – 1.9% Last quarter – 1.3% Helped by improvement in housing market About 1/3 of the data is estimated for the final months data. If you take out a temporary defense spending spike the number would be 1.5%
“We are seeing new contracts and investment decisions being delayed.” –CFO Verizon “As I talk to business people, they’re all basically sitting on their hands.” –CEO BB&T “We don’t think it’s going to happen. …They just haven’t figured out how to solve it.” –CEO United Technologies
Many businesses are slowing down contracts and productions in anticipation They want to wait and see what decision will be made As year end gets closer there will be more news and firmer expectations which will materialize
Fiscal Cliff - Recession Bound? Fri 26 Oct 12 | 08:32 AM ET