She didn't want to risk shorting the stock, but she wanted to bet on it falling so she bought a put option for $0.50 with a strike price of $13 when the stock was over $15. Miss Bubbleburster on the other hand made a nice profit on Hype's crash. However, he has only lost the premium he paid. Mr Chase waits till expiry and the stock falls further to $10, which means the options in fact expire worthless. A week later, the stock falls to $13 and the options are now worth only $0.20 as there's only a little chance they would expire in the money. Mr Chase's options have also increased in price and now he could sell them for $1.5 ($150 for one contract) but he decides to wait for an even better price. After one week, the stock has risen to $16. He's buying one contract (10 options) for a total of $90 plus commission. The price of the option is the so-called premium, which is currently $0.90. He's buying the $15 call option, which gives him the right (but not the obligation) to buy the stock at the $15 price until expiry, irrespective of the actual price. He thinks this window will give him enough time to profit if the stock extends its rally. He checks the so-called option chain of the stock and sees that the next option expiry is in 20 days. He doesn't want to miss a potential rally though, so he decides to buy a call option on the stock instead of buying it outright. Mr Chase thinks there might be still some juice left in it, but at the same time, he's afraid of a downward price correction. Mr Chase really likes a recent hot stock called Hype, whose price has gone up from $10 to $14 in a very short time. If you can estimate how quickly a company's shares will increase in value, winning small profits isn't that difficult.Let's have a look at how a handful of traders with different motivations can buy and sell options in the same individual equity. You profit when the shares you've bought become worth more than the strike price you agreed to.
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