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Doug H.
04-05-2004, 09:27 PM
Anyone have any experience with options and trading ? I don't really understand or know how they work, or even if they are worth it but a company called and wanted to talk to me regarding unleaded fuel and that it will be going up and i should jump aboard.
Any experiences out there ?

Cole Sanger
04-05-2004, 10:27 PM
So with the options, they are funny. You only get the gravy. So if your company gives you 1 share at $20 and the stock is worth $21, you get $1. 10 shares at $20 and the stock is worth $30, you get $100 and so on. That's why most companies will give you a crap load of shares that don't mature for a year or more. My experience is options suck. I got a ton, but they aren't worth anything. Don't forget to price in the cost of selling the shares. If you have more than one company that you can work with, go with the one that costs the less to sell, and look at their price to send you the money too. It all adds up. Now on regular stock trading, it can get tricky. I am by no means an expert on any of this, but I can tell you about my experinces. My experiences work on Employee Stock Options. Basically I put some of my check into an account and the company matches a percentage and then buys stock every now and then in my name. Anyway, it's pretty much the same as buying stock for yourself and then selling it. I can tell you about the selling it. You own it and sell it for whatever. If you buy it for $10 a share, and buy 10 shares, you pay $100 plus all fees the trading company charges (e-trade, solomon smith barney, whoever). Same goes for selling it. You just have to watch out where you are putting it and what it is doing. As far as the gas stuff goes, flip a coin. The stock can go up just as fast as down. In my case it seems to go down a lot faster than it goes up. I know it makes people money, but I have lost money on it every time I buy/sell. The other thing to think about is your taxes. Keep in mind that when you make money on that stock, you have to account for that at tax time. So if you make a lot of money, that will be pure income and you will get taxed on it. It has actually helped me during tax season because I lost money, so that took away from my gross income and I got more back. It's all smoke and mirrors if you ask me, be careful and know where your money is at all times. If this was just a cold call by some company, you can be sure that they are going to make money off of you some how. Good luck, and remember your friends when you strike it rich.

BajaMike
04-05-2004, 10:46 PM
Originally posted by Doug H.
Anyone have any experience with options and trading ? I don't really understand or know how they work, or even if they are worth it but a company called and wanted to talk to me regarding unleaded fuel and that it will be going up and i should jump aboard.
Any experiences out there ?
Trading in commodity options (like gas, wheat, gold, currency, etc) is very speculative and very dangerous. It is normally highly leveraged (meaning you are actually borrowing money to invest).
When you buy a stock, the most you can loose is the original investment. When you buy options, you can invest $10,000, for example, and if things go bad, you can end up owing $40,000 or $100,000 or more. Often these telephone solicitors don’t tell people the down side. Of course, you can also make a lot of money, but it’s very dangerous. I have a friend who is a options broker and has had customers who have had to mortgage or sell their homes to pay off accounts after things went bad.
If you want more info, I can give you his name and number, but I would not recommend options investing.
:( :( :(

SERIOUS ISSUES
04-06-2004, 06:14 AM
I am a stock broker in Phoenix. I will tell you options trading is very fun but you can loose or win very fast. if you dont have time to stay on top of it dont do it. you dont have to leverage your self, you can just use your own money. I can tell you have have been down 70% of my money over night and by the afternoon been up 250%. that should give you an idea.
I think I still have an options program around the house. If you realy want to learn PM me.

SoCalOffshore
04-06-2004, 06:38 AM
Dont do it. Never invest with someone who calls you on the phone. THe only one who will make money is the broker. You will loose all the money you invest.

HavasuDreamin'
04-06-2004, 06:41 AM
You know, it has been a while since I dealt with options, futures, forwards, etc., but if I am not mistaken a stock option gives you the right to purchase or sell a stock at a specified price.
You buy a call option if you think the underlying stock will increase in value. If it does, the option contract allows you to buy it at the specified price stipulated in the option, then turn around and sell it at the current market rate........theoretically profiting the difference (aside from transaction fees). If the stock doesn't increase in value, you don't exercise your option.
Put options work the opposite and are purchased when you believe the underlying stock will decrease in value. I am not sure exactly how things work with put options, but essentially you borrow a stock and sell it at the current market price. If it drops in price, you buy it back and return to the broker pocketing the difference. Problem with puts is that you are obligated to buy it back even if the value has increased. In this scenario, you have sold low and bought high. That can run into some money.
At any rate, you definately have to be on top of your game.

Essex502
04-06-2004, 07:00 AM
Commodities trading as a previous poster said requires you to stay on top of the action all the time. If you don't have the time or inclination to do so find another venue for your investment.
Employee stock options can be great depending of the plan with the firm you're with. Options "granted" as incentive compensation are fantastic if the company is growing and profitable or will be in the future. Think of it as free money...the compnay grants you the right to purchase the stock at a fixed price (usually the price on the day the options are "granted") in the future - regardless of the price the stock is selling for at the time of execution. Say...today the stock is at $20.00 a share and you're granted the right to purchase 1,000 shares. Usually, there is a minimum blackout time you must hold them - say 1 year - before you can exercize the option. So...in a year the price has gone up to $50.00 a share. If you exercize them you will gross $30.00 a share less expenses and fees the broker will charge you for the transaction. If in a year the stock has dropped to less than $20 a share you wait and exercize them later. Usually there is also a limit as to how long you can hold the options before you must exercize them or abandon them. You can't loss money with these plans if they're structured correctly and you stand to make money if the company does well.
BTW...don't put all of your eggs in one basket (ala Enron or Global Crossing employees) when you invest in company stock plans.

SERIOUS ISSUES
04-06-2004, 07:18 AM
from the call Doug H got, it isn't employee stock options it is futures traiding. futures trading is alot like euity options options (puts and calls betting a stock go's up or down) thedifferance is futures is a pure bet. you can exercise to by or sell the stock (you cant own 100 gal. of unleaded gas) you just bet on the direction the prices will go and trade in or out of the futures contract.

Dave C
04-06-2004, 07:23 AM
.....and you pay a FEE to buy the futures or options contract.
I agree with SI, its not an ESOP. Sounds like a cold call for options/futures contracts.
BEWARE. if you are not well versed with options/futures don't get involved.
If you want a piece of the action, get educated first. Don't use margin (i.e. leverage) because you might as well kick yourself in the nuts first.
I got some books about options strategies and some of them sound "obscene" i.e. straddles, etc....:eek:

HavasuDreamin'
04-06-2004, 08:00 AM
Yeah you guys are right. I think one of the most hilarious commercials I have ever seen was one that came out when all those day trading company's were popping up.
It was one of the commercials similar to the Tom Vu Real Estate except it was with futures........
"Ever thought about an early retirement? With our special promotional package, learn how to trade futures a make more money than you every thought possible. With our easy 1-2-3 step program, you can be your own boss and work from your home."
Yeah right. LMAO.........:D

Cole Sanger
04-06-2004, 08:25 AM
Ever see the movie Boiler Room? Watch that and you won't want to get anywhere near the cold call.
http://www.***boat.com/image_center/data/500/643Boiler_Room.jpg

Floatin'
04-06-2004, 09:26 AM
I trade commodities very frequently and I only use options as insurance for the for the commodity I am trading. If I am long 2 soybean contracts I will buy put options to "hedge" my "bet". So if the soybean trade goes south on me I am not hurt too badly because I have a safty net. As far as just trading options on commodities by themselves I have not gotten too involved in them but I will say that with options at least you know up front exactly how much money you can possibly lose, because options have a price and when you pay that price you can't lose more than the amount you paid for the option, whereas buying the actual commodity you can lose your ass because you are leveraged and have to maintain a certain margin or the broker will liquidate your position. I am going to start looking into trading options 1 contract at a time because the down side is limited and the upside is unlimited. My advise is to start with 1 contract not the 10 contracts that most brokers want you to trade.

Doug H.
04-06-2004, 11:27 AM
Thanks a bunch you guys, i just learned a little more from all your experiences. :)