Newbie, is this easy money?

Discussion in 'Options' started by skaranam, Jan 6, 2006.

  1. skaranam


    I have just started considering options but haven't traded so far. I found this interesting CALL for Google.

    Today GOOG closed at $465.66.

    JAN06 $60 CALL Option $391.35 (as per IB).

    If I buy the call and excercise, my total cost is 391.35+60=451.60 (ignore commissions). So I can make a profit of 465.66-451.60=$14.06 for a total profit of $1,406. I don't think making money is so easy. What am I missing here?
  2. Htrader

    Htrader Guest

    Sorry, but IB is reporting the LAST trade price, and not the current bid/ask which is around $405.
  3. it aint that easy bro. the quote you see is surely a quote of the last trade of that option, which was probably yesterday, check the bid ask for the real quote. since its so deep in the money there were probably none traded today. you can make money trading, but its too bad it aint that easy.
  4. If you could buy the option at 391.35, but you can't.
  5. If you go long any index you make free money$$
  6. Dogfish


    I trade outright futures of german and american treasuries but woud like to understand options more.

    I keep getting recommended the non farm payroll volatility option trade.

    "Sell volatility with a straddle in the front month serial option contract (TYG6) on Thursday's close and cover (payroll) Friday's close."

    This (or holding for 3 more closes) has been profitable over the last 12 months with the exception of april where I think there was a loss of about a third of the average profit. On the payroll just gone the net position was a credit of 4 options ticks or $62.50.

    Could someone with a better understanding of options break down this recommendation into what is being bought and sold, calls, puts in which contracts, and what the potential damage exposure is. I don't have to write any option in this trade is that right?

    Thanks in advance
  7. MTE


    Basically, it means selling (writing) a call and a put with the same strike price and expiry date. Your maximum profit is the amount you receive for the sale of the call and put and your maximum potential loss is, well, infinity.

    Anyone recommending selling a straddle to someone who doesn't understand options is careless, to say the least!

    Here's my advice: Don't sell any options until you get yourself educated and fully understand all the risks and the mechanics.
  8. Dogfish


    Thanks for that. It's not a personal recommendation but as you say I don't fancy writing options before I understand a lot more, although the risk looks tolerable relative to my outright positions over that figure.