Introduction to Stock Options

Yahoo Finance ^ | 1/27/09 | Staff

[Golddigger3]

Stock options provide advanced investors with additional opportunities for potentially rewarding returns. But stock options do possess risks that require an in-depth understanding of how they work. This article provides a basic overview of stock options.

[Cedric]

Write ‘em, don’t buy ‘em (ever).

[Red in Blue PA]

Never is a long time.

If the Dow fell to 2000, buying (some) calls would probably be very lucrative. Just as would buying puts if the Dow went to 30,000.

[Cedric]

97% of buyers are losers.

Don’t buy ‘em EVER!

[Red in Blue PA]

“97% of buyers are losers.”

Could apply this rule to the general stock market lately;-)

[Attention Surplus Disorder]

It's probably exaggerated that "97%" of option buyers are losers, though most likely the great majority are. "That's why there are those big buildings in Las Vegas". It's also true that many, many options buyers "WANT" to be losers, in a similar way that most folks who buy home fire insurance WANT to lose their "bets".

But I will tell you this: The guys who blow their brains out one day, and I mean the 25-year veterans, or who are carried out of the pits on a stretcher...those guys are almost inevitably short options!