Why every Investor should Know what are Call Options and Put Options!

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Stock options today i’m going to discuss everything you need to know about what call options are what put options are how i have made insane returns off of stock options and i’m going to go ahead and share the risk that you take when you do do options i cannot wait to share this with you guys today good day subscribers thank you so much for joining me today i am

Jeremy this is the financial education channel and today we’re talking about call options and put options in how you can make insane returns from them how i have made some phenomenal returns so let’s just jump right into this what is a call option what is a put option of call option first is you placing a bet that a stock price will be above a certain price on a

Certain date for example apple let’s take apple it’s a big company if apples have stock price is $100 you’re gonna place a bet that apple stock price will be at least 110 dollars by let’s say january 2017 so if apple stock price is above 110 dollars by january 2017 you make money and i’m gonna go ahead and get into all this on how much money you make i just want to

Explain first what simply what it is and a put option is the exact inverse opposite of what a call option is so you’re placing a bet that a stock will drop to a certain price by a certain date so once again let’s say apple is $100 share right now you’re betting that it’s gonna be under $90 a share and you’re betting that it’s gonna be that price by january 2017 if

Apple stock price drops below $90 you make money because you bought a put option so let’s go ahead i’m gonna give you guys some real-world examples on stock options i bought so you can see exactly how much money do you make and how much do you risk let’s go ahead and jump into this so a little while ago maybe three to six months ago i bought a lot of gopro options

So first let’s go ahead and put this here gopro that’s or ticker symbol gpro so i bought long-term options at the time they’re they’re expiring in january 2018 so when you buy an option that’s the first thing you want to look at when do the options expire there’s many different dates you can do you could do ones as short term as next week you can do next month you

Can do next year or you can do super long term which is usually up to two years out so i bought january 2018 so let’s put this down january 2018 now i believe gopro stock price was gonna go up substantially over the next year to two years so at that time gopros actual stock price was $10 a share okay so $10 a share was the actual price we’ll put ap that’s what the

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Actual price was at when i was buying these options now there’s what’s called a strike price the strike price is what the minimum amount that stock needs to be at so the strike price i bought were eight dollars a share eight dollars a share now obviously you have to pay a premium of some kind because no one’s gonna sell you a strike price of $8 when the stock’s

Already at $10 right because then you could just go flip that and sell it to somebody else and make a 20% return like that that’s not realistic so you always have to pay a premium on whatever it is so that way it doesn’t make sense for you to have all this time and then you already make money off the right off the bat so you have to pay a premium price first so

A premium i paid preemie um excuse my sloppy handwriting i paid $4 so what does all this mean i got a strike price of $4 i got a premium or excuse me i got a strike price of $8 i have a premium of $4 the actual stock price right now is at $10 so what i paid i paid $4 for options contracts now my break-even is $12 $12 oh that’s a sloppy money sign $12 d-ii so my

Breakeven is $12 i need to get to at least $12 by january 2018 just to break even now i made no money i made no money if it’s only at $12 in january 2018 but you know what let’s see what this happened so far so currently gopro stock price is $15 a share and we are in september of 2016 so currently gopro has a stock price of $15 and we’ll just put c meaning current

So currently gopro stock price is $15 so what does that mean so far okay if i bought the stock straight up if i bought a straight up at $10 a share i would be a 50% currently right because $10 to $15 is 50% so if i bought that stock straight up its i’m up 50% now my breakevens $12 i need to get to 15 so how much am i up right now well let’s see i’m up a roughly

Looks like around mmm well less than 50% right i’m up probably around 40 40 percent 35% so that’s not horrible that’s not great right but at let’s see ordo excuse me no no i completely my setup i apologize i’m up over 75% because we’re basing it off of $4 so once gopro stock price gets to $16 i’ve actually doubled my money because i only paid $4 for the premium i

Only paid $4 so once in so it’s $12 my breakeven once it gets to $16 i’ve actually doubled my money currently on those options i’m up around 75% at the moment 75 maybe 80% you can calculate it out if you really wanted to but it’s right around there so that’s the power of options over already made a much better return that’s great now let’s say gopro stock price

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In january 2018 is that oh gosh let’s say it’s at $40 okay let’s say it’s at $40 in january 2018 if i would have bought the stock straight up i made a four hundred percent return ten dollars for forty dollars is a four hundred percent return that’s phenomenal that’s a really great return regardless even if i bought the stock straight up but what did i make on my

Money well four dollars times that by 10 then you get 40 i mean ten times my money by buying the options first is buying the stock straight up so i made four times have my money if i went ten to forty if i actually invested in just a stock i made ten times my money by going in go ahead and doing call options that is the power of options and that’s how you can

Immensely increase returns but but of course there’s risk there is risk what if gopro stock price was eight dollars a share in january 2018 if it was $8 a share in 2018 i lost 100% of my money 100% that’s the downside of options you can lose everything if gopro stock price eight dollars i lost all my money on those options they’re completely worthless because

I they i have a twelve dollar break even i paid four dollars if it doesn’t even get back to eat if it’s not higher than eight dollars that’s one hundred percent but if i just bought the stock straight up i’m only down twenty percent at that point because ten 2/8 about twenty percent so you can see with options there’s so much more downside of course you can lose

Everything we’re in a stock you can’t lose everything unless company goes bankrupt but there is so much more upside if you play it right now long-term options is what i like all these long-term ones because you have time to play things out and i’m a long-term thinker which is one two three years out now you can play short-term options but those are looser heavily

Risky but there is also huge returns because sometimes you can get paid pennies for an option and if a stock shoots up a ton or down a ton depending on if you bought call or put options you can make so much money it’s such a great return on those like way more than ten times i’ve seen people make hundred to a thousand times their money on those type of options but

Those are those are severely severely risky because they’re so short-term oriented so as you see here there’s a great power in options and this is why every single investor should know about options so if they see a stock severely miss priced either high or low they can go ahead and take advantage and do options rather than buy the stock straight up so you can get

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A far greater return if you see a stock trading at multiples that it does not deserve and you think that stocks going way down might be worth putting some put options on and if you see a stock that’s way way way undervalued then why not load up on a bunch of call options as long as they’re long term and you believe in that company it may make sense but remember

Options are highly highly risky because like i pointed out you can lose everything so always keep that in the back of your mind now i didn’t know for full disclosure about options well i always knew about options but he didn’t really learn about them and start to really study them till i was already three four years in investing that doesn’t mean you if you’re a

New investor you have to wait that long but i would feel completely comfortable with just buying stocks way before you start buy an option because like i said options are highly risky there or for much more advanced investors ones that are super confident that are very knowledgeable know how to get in and out of positions quick know how to you know avoid things

Those kinds of things so i suggest options as being an advanced investor step once you’ve been doing it a few years and you feel comfortable and you’ve proven that you can do it on just buying a stock straight up then go ahead and get into options but every investor should understand them from pretty much after the first year after your first year in investing you

Should start really studying them and really understanding someone your two year three comes along you can start playing a little bit in options and you’re gonna start learning in those kinds of things i thank you so much for watching this guy’s i hope this was incredibly and helpful to understand what exactly call options are what exactly put options are if you

Haven’t subscribed you may – i took a ton about stocks and investing these kinds of products and whatnot i talk about business i’m a young entrepreneur i talked together you know entrepreneurs and give a lot of great tips i talk personal finance in help out that way anyways thank you so much for watching guys and have a great day

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Why every Investor should Know what are Call Options and Put Options! By Financial Education

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