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GoldIndependent6 t1_j28odfa wrote

Reply to comment by 2ndSifter in Progressive: The Valuation Enigma by 2ndSifter

So I can’t buy a put unless I own 100 shares of PGR? I’m still wet behind the ears, sorry!

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2ndSifter OP t1_j28q5bh wrote

Purchasing a PUT or CALL gives an investor the right, but not the obligation to purchase 100 shares at the underlying strike price. Given that options are contracts, shares typically never change hands.

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GoldIndependent6 t1_j28qr6m wrote

Right I understand the “gist” of it. Here is where it gets confusing for me. I buy a call for example, for $80. Strike price is $150, exp 1 month out. Whatever. Boom I’m in the money, I sell the contract, collect the premium right? So maybe the premium on the contract went up to $200 or something so I made $50? I couldn’t exercise right because I don’t have the shares? Then on the flip side, if it was a put I bought, is that where getting assigned comes in and you get wrecked? Im just confused yo. Like where is the profit made off options. The difference in price of the option contract itself?

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mustbethaMonay t1_j29exx4 wrote

Yes, the money most people make in trading options is off the difference in premium. You're really trading premiums, unless you hold till expiration, when it expires worthless if OTM or assigned or cashed out if ITM. most brokerages will let you partially exercise with the value of the contract.

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redpillbluepill4 t1_j2cwctq wrote

You only need shares to sell TO OPEN a call, or a ton of money to sell TO OPEN a put.

If you're buying a call or a put then you just pay the premium.

Watch YouTube videos

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