Call and Put Options Explained

An option contract is an agreement wherein the owner has the right to buy or sell a security or an asset at a particular price on a fixed date in the future. It is called an option because the owner of the contract is not committed to carry out the obligation of the contract if he or she feels that it is disadvantageous.

There are two types of options contracts: call options and put options.

Call Options
In simple terms, call options give the owner the right to buy the underlying asset in the contract. Again, it is not an obligation.

For example, John and Tom agreed on a call options contract wherein John will buy from Tom, 100 shares (equivalent to one option) of Company A at $20 (strike price) what will expire on the third Friday of April. The current price of the share is $20.

At the expiry date (also called maturity date), the share price of Company A remains at $25. John can then exercise his right to buy the share for $20 and thus, yielding $5. Meanwhile, if the share price goes down to $22, John can still earn $2 by simply exercising his rights as stated in the contract. In whichever way, any amount higher than the strike price at the end of the contract will become the profit of the owner. But before it can happen, the owner who decides to pursue his right has to have his money ready to pay for the amount.

However, if the share price goes down below $20, say $18, on the maturity date, it will be too expensive for John so he can just ignore the contract since he is not obliged to carry it out. He will only lose the amount he paid for the contract called the Option Premium. Tom, on the other hand will keep the asset and the premium, which in a sense, is his profit.

Put Options
In put options, the buyer has the right to sell an asset to the writer (the seller). Just like the call asset, it is bounded by a contract which states that the underlying asset will be sold at a particular price and a particular date. But the similarity ends there. In put options, the writer has to buy the underlying asset at the strike price if the buyer exercises this option.

Let us continue with John and Tom. John bought call options from Tom. But he could also buy put options from Tom. If John buys put options, it means that he buys the right to sell Company A’s shares at $20 on April 1. If the price of shares goes down below $20 on the expiry date, John can exercise his right and can still sell it at $20, thus making a profit.

Buying put option allows investors to earn when price of shares drops at the end of the contract.

Profit potentials are unlimited for the buyers of put options, especially if the market begins to sell off. On the other hand, risks are limited if the market goes against them.

Important note:

In reality, trading of options or transactions does not happen between two persons. Buying or selling can happen without knowing the identity of the other party.

Options are only sold in 100 share lots. So if the share price is $20, you will have to pay $2,000 for each option contract plus the Option Premium.

January 30th, 2010 | Tags: , , , | No Comments »

Getting A Cash Advance Loan that Doesn’t Require a Credit Check

One way that companies make the process of applying for a cash advance so fast and easy is by not conducting credit checks.  When applying for a cash advance you have to wait for the credit check to come through then the company must check if you are eligible for the cash advance.  The process of a credit check takes time, though, and when you are in financial trouble, the last thing you have is time.  A no credit check policy cuts down the time considerably, and you can get an answer within a couple of days or even 24 hours as some companies promise.

A no credit check policy is a good thing if the cash is needed quickly, but if you have a poor credit history, then you could find yourself in a bit of a problem.  If you know that your credit history is poor, then you shouldn’t be applying for a cash advance or even a loan of any sort as this will just lead you into trouble with no real way out of it–a downward spiral of debt is a could be the outcome.

There are people that want to improve their credit rating and are in need of some extra cash also, so a cash advance could be the way to solve both problems. With a cash advance, you get the extra cash that you need, then you pay off the advance and your credit rating receives a nice boost.  This is a good way to revive your credit history especially if you know that you can pay off the cash advance.

Using a cash advance company that has a no credit check policy is a good way for people to correct the mistakes they have made with money in the past so they can show the companies that they do want to correct what they have done and that they can be more careful with their money in the future.

January 20th, 2010 | Tags: , , , , | No Comments »

Selling a Used Car Can Be Done Without A Lot of Stress

If you are looking to sell a used car, you will want to make sure that you are doing a few necessary things first. You want to be sure that you are going by procedure so that you are getting the best deal for yourself and protecting you and your car from not so nice buyers that are going to come around to look at your car. You want to be ready for anything so that you are calm and cool when you are selling any type of used car.

Selling a car can be frustrating.  It is something that can be irritating too. You need to be ready to take on any challenges so that you are not setting yourself up for problems later on. You want to make sure that you are in it for the long haul too.  Sometimes used cars do not sell right away. In fact, it may take much longer than what you think to get rid of the car that you are selling.  You need to make sure that you can afford to take the time needed to sell it the right way.

If you are looking to get a certain price from the car that you are selling, you are a going to have to make sure that you are firm on it. You will want to be sure that you are not going to crumble when someone tries to give you less than what you want.  You will need to be sure that you are willing to walk away from any deal that is not meeting you satisfaction.

You need to sell your car honestly.  You should not be trying to hide anything that is wrong with the car. You will want to disclose any problems that you have with it so that the potential buyer is not in for any unexpected problems later on. You do not want to risk getting in trouble with the person or the law by lying to a customer about the used car that you are trying to sell. You want to also make them aware of anything that is broken on the car. You should never want to deceive anyone into buying something that you have for sale.  It is just not ethical and you will not feel right about it later.

Make sure that you have the phone number and the price listed on your used car that is for sell.  You want to be sure that passing people see the numbers so they can call you to find out anything they want to know about the car.  You will also want to advertise the price so that people know what you are expecting out of the car.  This will make it easier when it comes to actually getting the selling price that you want for the car.

With a few good tips and the right attitude, you will be able to sell your used car in no time at all and feel good about the transaction. You will have the money that you are looking for and not have to sacrifice your good name at the same time.

January 12th, 2010 | Tags: , , , | No Comments »

Comparing and Contrasting Debt Consolidation Services

Debt counseling services are geared to help families and individuals repair their credit. Debt counseling services are often organizations that are sponsored by the people who you owe money. These debt services are usually classified into two groups: non profit and for profit.

To get help from any debt services, you must have a stable income; at which point, you should contact a counselor, who will help you by calling their sponsors, asking for mercy on your behalf. Once the creditors are contacted on your behalf, the services will next–according to their advertisement–work out an agreement that conforms to your current budget.

The people who are offering their service to you for debt relief are calling their sponsoring sources. This means that the sources are supporting the service that you are hiring to relieve you of your debts. Therefore, if you think these services will work harder to get you relief versus working hard for the many creditors that are supporting them, you’d better think again.

The debt services may have qualified personnel who know how to go through the steps of debt relief; but do you honestly think that these services getting paid by you and by many creditors are going to tell you that you can handle debt consolidation on your own?–Definitely not.

As you can see, debt consolidation comes with many risks; therefore, if you are searching for a service to help you get out of debt, be advised that you are adding more debt in most instances. There are, however, legitimate services for debt relief that offer free services. These services will help you through the process of consolidating your debt, but they will not do the work for you. The services are great, since they offer free counseling, debt solutions, debt plans and so much more.

January 8th, 2010 | Tags: , , , | No Comments »