In the Money Options: how traders profit from the movement of stocks without actually owning them...
In the money options (ITM) are a good way to participate in a stock's price movement without actually owning the stock.
Traders will often target the ITM option as its price moves very close to the stocks actual price movement.
For example: You buy an option for $1 on a $30 stock. The stock moves up in price to $31. A 3% gain, very realistic.
The $1 "ITM option" will also move up a dollar in price to $2. A 50% gain, also very realistic.
Now let me give you a minute to wipe the drool from your mouth and tell you that these are just examples. Yes it plays out "somewhat" like that, but don't count on it.
I'm getting ahead of myself. Let me define what In the money options (ITM) are.
A "Call option" would be ITM if the stock price were trading "above" the strike price.
For example, suppose the stock price is $40 and the strike price is $20. You would have the right to "buy" the stock for $20.
If you exercised your right and bought the stock for $20, you could immediately sell it for $40 on the open market and earn a $20 profit.
Another way to explain it is that you could say your option has $20 of real value because you can exercise your option and buy the stock for $20 less than the current market price.
A "Put option" is ITM if the strike price is "higher" than the market price of the underlying stock.
Here's a picture for you visual learners:
ITM options cost more, but people like them because they generally move dollar for dollar with the stock price.
It's not a strategy I trade so I don't have much else to say on the matter.
Onward and upward...
The Passive Stock Options Trading Book Series
Discover how to achieve financial freedom in only 5 years...
Read what others have to say about the book. [Amazon affiliate link]
If You're Looking For A Reliable Lower Risk Way To Be
Profitable With Options, Try The "Buffett Strategy"...
I don't know what has brought you to my page. Maybe you are interested in options to help you reduce the risk of your other stock market holdings.
Maybe you are looking for a way to generate a little additional income for retirement. Or maybe you've just heard about options, you're not sure what they are, and you want a simple step-by-step guide to understanding them and getting started with them.
I have no idea if options are even right for you, but I do promise to show you what has worked for me and the exact steps I've taken to use them to earn additional income, protect my investments, and to experience freedom in my life.
If you want to learn more, I invite you to download a FREE video case study on how to trade options like Warren Buffett.
Inside you will discover...
- How investors pay me money to buy their stock.
- How "combining option selling with option buying" resulted in a 60% growth of my account.
- The "Family Freedom Fund" strategy I use to beat the market each year (I'm an experienced investor so your results may vary).
- And lastly, there is a high risk way to trade options and a low risk way. You'll discover a low risk "sleep well at night" method of investing.
Fill in your details below to download your FREE case study. Along with your case study, you'll also get my daily emails where I share my favorite option trading strategies, examples of the trades I'm currently in, and ways to protect your investments in any market.
Wealth Building Resources
Free Video Case Study (Newsletter)
Options Trading Made Simple Book (My Kindle book)
Options Wealth Academy (High End Training Program co-founded by Travis)
Free Options Course Learning Modules
|
Module 1: Option Basics |
Module 2: Option Value |
Module 3: Basic Strategies |
|
Module 4: Stock Charts |
Module 5: Technical Indicators |
Module 6: The 7-step process I use to trade stock options |
Learn Stock Options Trading Home Page
