hey, i'm new to options, and i was wondering how it's possible to make money? i checked the IB website and each contract is $1.00... and if you're in to buy and sell options, how do you make money with this high transaction cost? Thanks.
You are concerned about a buck transaction cost on a contract with .05-.10 spreads? Anyway, I heard good things about greentreetrading (www.greentreetrading.com), maybe you could check that one out. Tiki
i guess i will put it in other terms. let's say i buy 100, 22.50 calls of MSFT @ $2.25. and let's say the calls increase in value to $3, so i make 0.75 profit/contract. so that's $75 profit. but, to buy the contracts it would have cost me $100 and another $100 to sell them... thus I'd be losing $125. am i missing something? thanks.
haha no man $1 per whole contract, so buy @ 2.25 and sell @ 3.00 will result in a ((3-2.25)*100) - (2x1) = $73 profit you make $0.75 per face-value contract, but option contracts often have a multiplier of 100 per contract, so the real value of the contract is the 'value' times the multiplier (often 100, sometimes more or less after splits or stock emissions..). cheers, Tiki
He is also operating on the ridiculous premise that MSFT calls might actually appreciate in value. That, I'm afraid to say, is a virtual statistical imposibility. The empirical evidence resides in my account.
Hellodollars made some good points about not buying calls on MSFT lately ; what has been excellant % gainer in years past. May make occasional option money with great care & work; & trading underlying market also. Believe it or not; $1 is low, but to restate the obvious dont actively trade it like NYSE.
I haven't been trading very long but I have been impressed with www.thinkorswim.com. Their handholding is exceptional, their platform seems very good, and their commissions though not lowest are quite low. They claim they are the only broker that doesn't take order flow money, and in theory their executions might be a little better. In the end, with options, this is what counts because it is your bid/asked spreads that are the friction here, not the commissions so much. B/A spreads can be a killer and if their execution is indeed better, that would outweight slightly higher commissions.