Unformatted text preview: you do? You can
buy a call option. A call option will sell for a
fraction of the cost of the stock. So, with
limited resources, you decide to buy the call
option, which gives you the right to buy, say,
100 shares of the stock at $250 anytime during the next three months.
Wait a minute. If you don’t have the money
to buy the stock at $250 a share now, why
does anyone think you will have the money to
buy the stock at $250 in a few months? Well,
you don’t have to buy the stock. If you are
right that the price of the stock will rise, then
the call option you are holding will become
worth more to people. In other words, if you
bought the option when the price of the stock
was $250, and the stock rises to $300, then
your call option has become more valuable.
You can sell it and benefit from the uptick in
the price of the stock.
Alternatively, let’s say you expect the price
of the stock to fall. Then you can buy a put
option. In other words, you buy the right to
sell the stock for $250 anytime during the
next three months. If the price does fall, then
your option becomes more valuable. In fact,
the further the price falls, the more valuable
your put option becomes. People who have
the stock and want to sell it for a price higher he left side of the following table shows the top 10 days for the largest
point gains in the Dow. For example, the Dow went up by 499.19
points on March 16, 2000. Keep in mind that the largest point gain in a
day is not the same as the largest percentage gain in a day. We show the
top 10 days for the largest percentage gain on the right side of the table. T Largest Point Gains
Rank Date Point
342.95 Date Percentage
+9.19 The current price of a call
option for AT&T stock is $10, while the current p...
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This document was uploaded on 01/16/2014.
- Winter '14