The option is a nice size part of the Series 7 exam. They are available in Series 7 in various combinations and settings. These include separate options, spreads [buying and selling one type], spanning [using bullish and bearish] and stock positions with options.
This article focuses on stocks and puts together and how to quickly identify the benefits, losses and breakeven points of the 7 series of exams. If you look at common sense, you will choose the ACE option. Not a memory map.
What you have to remember is that when you see an option with a stock position, whether the stock position is long or empty - this option is only used for one of the two things. Protection or income. It is never the main focus of the strategy. So, when you look at the strategy and try to see where the maximum revenue and maximum loss might come from, consider where your money is.
If you own 100 shares of TRW at $86, your investment is $8,600. Now, if you see this position in the 7 Series exam and the price of buying 1 TRW 80 Put is $300, it is very important to see what happens. When you own stocks, you want it to rise. A put option is the right to sell shares at an execution price [80]. If you buy a put option separately and there is no long position on the same stock, you will want the stock to fall. Your biggest benefit is based on inventory reduction. However, if it has a long stock position, Put is their only protection.
In the example:
Buy 100 shares of TRW at $86 per barrel and buy 1 hand TRW at $300
Focus on stocks when considering returns, losses, and breakevens.
Put options will not affect your stock returns. Focusing on stock means that you always want to buy stocks up. Whether it's a call or a put, you can choose to earn or protect. In this case, Put was bought, obviously this is not income. This is to protect the stock from falling.
Therefore, when you own inventory and have put options, the maximum return is always unlimited. The premium is paid, so this will earn, but the revenue is still unlimited. Stocks can rise to $100, $200...
Maximum loss - put options are to protect stocks - ie IT. The best case is when the stock passes the cap and the put option expires, but without the put option, the stock may fall to 0. Selling allows the stock to sell at 80, no matter how low the stock is. It acts as a stop loss order. However, this option does not automatically "trigger" as if the order was stopped. Investors must exercise options and put options as costs. In this case, $300. Therefore, the biggest loss for the stock and the bearish position is the loss spread of 86 stocks and the guaranteed sell price of 80, which is $600 plus $300 in premiums. Answer: $900.
The 7 Series exam is very simple, and the break-even point for inventory and options is very simple. This is the total cost of the cost. Stock positions and premiums paid or received. The stock cost is 86 - the premium is 3, so BREAKEVEN is 89 you start making money 90. Observe this skill issue. The break-even point and the profit point are not the same.
Find more articles about the 7 series trading strategy understanding or just for your own knowledge. Also see our 7 series blog for more tips.
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Orignal From: Series 7 Exam Options - Stocks and Investments
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