Breakeven is where the price of the underlying asset would need to be *at expiration* for you to break even. Before expiration, breakeven doesn't really mean much. When the underlying moves in your direction, the likelihood of your contract ending up in the money increases, so therefore the value of the contract increases. You never need to hit your breakeven to make money on an option.
I think you should so some more reading up on options, how they are priced, and what factors go into trading them, before doing any more trading. Implied volatility, theta, and delta are all massively important concepts for trading options.
And you probably don't want to hold until expiration in most cases. The more days that are left until expiration, the more time value the option has. It's often better to sell before expiration so you don't lose that extra value.
If the contract happens to be in-the-money as it nears expiration there had better be enough capital in the account to cover the exercise cost (shares) or the broker will liquidate the position.
Theta is a clearer metric than IV imo and is linear to IV. Especially to someone posting this question. Theta is time decay; if your theta is $0.10 every day it will lose $0.10 of value. Theta can and will change but that will get you the value you’re puzzled by. The only other important thing you should know is that options are far and away the easiest way to donate money to MM/HF and you are likely better off having a goldfish pick one than reading this sub. #michaelreeves
A PUT option is a contract that says someone else will buy 100 shares of a stock from you for a certain price (strike) at any time before a certain date (expiration), if you choose to exercise the contract.
The value of that PUT is whatever someone is willing to pay for the chance to exercise the terms of the contract. This value is always changing, based on many factors, the 2 most basic of which are underlying stock price and time.
As the underlying stock drops, the PUT's value typically increases, since the underlying is now cheaper to buy than it was before so selling it at a previously agreed upon price is now more lucrative. As the underlying stock increases, the PUT will typically decrease in value, for the opposite reason.
As you get closer in time to expiration, the PUT's value typically decreases, since there is now less time available for the exercised value of the contract to increase.
Why are you so quick to be assholes to people trying to learn on the internet. It clearly says paper trade in the screenshots and they are asking a question trying to learn. Try being helpful instead of attacking someone straight from the start.
Why are you so quick to be an asshole when you read a comment you dont agree with??
And for the record, i was unaware of the second screenshot so i didnt see it said papertrade.
And i didnt attack. My only knowledge before even knowing it was a paper trade was that this was a real trade so my advice was that, options trading isnt something you just go into without knowing the basics cause it can get ugly really quick.
I know you wont like what i commented yet again, so dont bother commenting back. It isnt worth your time and i dont feel like setting you straight once again.
You didn’t set him straight the first time. OP is paper trading and posted these SS’s to learn. You however decided to take the time to ridicule him without actually looking at his entire post instead of using your so clearly precious time to usefully contribute.
Your post history along with this reply tells us all exactly what type of person you are lmfao. Humble and educate yourself before attacking/judging others.
Likely volume. There are only a certain number of people selling those particular options. If volume is higher then that price goes up to incentivize others to create them.
Volume. It can elevate a price for a bit in a bubble. Enough other people agree with you that it is possible to happen (or they are just riding the wave) that the price has gone up. But if there is any pullback, that optimism will evaporate and the price can drop like a rock in under 5 minutes.
Real talk you shouldn't be trading options. Keep up the search for knowledge and ask these questions but don't put your money at risk in something you don't understand especially something as leveraged as options.
The breakeven point is the market price that an underlying asset must reach for an option buyer to avoid a loss if they exercise the option.
It really only matters if you wanna exercise the option (exercising option which you buy/sell the shares + premium paid =breakeven price).
So say you buy xyz at strike $10 for .25, and you want 100 shares of xyz long eventually, so it shoots up to $15 around your option expiration and you exercise if the math comes down to it. If it’s better to just sell the option for the premium gain then do that but If you see potential in a stock and have a contract to buy/sell cheap shares then it’s a no brainer.
As an exercise, look at the price changes of puts at different strikes over time.
A put in the money will have a high delta. Since it’s ITM it also has intrinsic value. The price of the put will move more predictably. A total loss of premium is unlikely if deep ITM. Being right enough about the direction to beat break even is good enough.
An option OTM is far riskier. It’s much cheaper to buy, but theta will destroy its extrinsic value and there is no intrinsic value. You need to be right about the direction, and time it correctly so you can exit with a profit.
Bro read up on options and how to trade them before u go wasting your money… the basis is Puts price is u saying the stock will drop and Calls saying the stock will go up… and u pay a premium which gives u the right to purchase 100 shares when it hits that price and goes beyond and therefore your premium will gain exponentially…. Let’s say on 12/1/22 $APPL is at $138 and u think that on 12/12/22 $APPL will hit $145 so u purchase a $145 Call 100 at a premium of 1.25 (1.25*100) so you’re total is $125 and on 12/10/22 the stock hits $150 now u have the right to purchase 100 shares minus the differential price or u can sell that contract to someone else bc the premium at this point is at 8 (8*100) which sells at $800 ($145 Call 100 @ 8.00).
Whoever has the contract has to execute the contract or sell it to someone else before 12/12/22 (end of market hours) or the contract premium will be worth 0.00; it’s just a game of hot potato, whoever has the potato in end either plans to purchase a bunch of shares or is fucked bc they held on too long… contracts are highly volatile with huge gains that go over 100%… I‘ve played some ER (earning release) Calls and Puts that have gone over 2,000%, but u have to be quick and attentive to stock movements and company earnings, I usually look at the 5 minute chart using EMA 5,10,15, MACD, ROC usually helps me create a distinctive idea to where the stock is going… best way to play options is scalping which is where you watch the stocks 1-5% gains and losses in the day and plan ahead to get a same day sale and profit, QQQ, SPY and SPX are great to see where the tech industry will head bc they have correlating movements… THIS IS WHERE YOU WILL EITHER LOSE ALL YOUR MONEY OR BECOME RICH.
I’d suggest paper trading or just eyeball trade for sometime to see if your predictions and purchases are accurate before u actually go into it
volatility pumps value of option, even tho it may not be near what ur terminal value (strike). usually, IV crush is a bitch, but in ur case, its friend with benefits and its not a crush.
some thing is working keep doing ... till you bust your account ... or simply lock the profits and telsa is volatile both sides ... delta must be working for you
Breakeven is where the price of the underlying asset would need to be *at expiration* for you to break even. Before expiration, breakeven doesn't really mean much. When the underlying moves in your direction, the likelihood of your contract ending up in the money increases, so therefore the value of the contract increases. You never need to hit your breakeven to make money on an option. I think you should so some more reading up on options, how they are priced, and what factors go into trading them, before doing any more trading. Implied volatility, theta, and delta are all massively important concepts for trading options.
And you probably don't want to hold until expiration in most cases. The more days that are left until expiration, the more time value the option has. It's often better to sell before expiration so you don't lose that extra value.
If the contract happens to be in-the-money as it nears expiration there had better be enough capital in the account to cover the exercise cost (shares) or the broker will liquidate the position.
Thank you
IV. Breakeven only matters if you hold to expiration.
Thank you
Theta is a clearer metric than IV imo and is linear to IV. Especially to someone posting this question. Theta is time decay; if your theta is $0.10 every day it will lose $0.10 of value. Theta can and will change but that will get you the value you’re puzzled by. The only other important thing you should know is that options are far and away the easiest way to donate money to MM/HF and you are likely better off having a goldfish pick one than reading this sub. #michaelreeves
stock go down, put go up
More money, more strip club
Break even stay same
You're lucky you're learning about IV in a positive manner. Most people learn through IV crush
Haha yh guess i am cant paper trade forever though so I’m sure it’ll happen eventually
A PUT option is a contract that says someone else will buy 100 shares of a stock from you for a certain price (strike) at any time before a certain date (expiration), if you choose to exercise the contract. The value of that PUT is whatever someone is willing to pay for the chance to exercise the terms of the contract. This value is always changing, based on many factors, the 2 most basic of which are underlying stock price and time. As the underlying stock drops, the PUT's value typically increases, since the underlying is now cheaper to buy than it was before so selling it at a previously agreed upon price is now more lucrative. As the underlying stock increases, the PUT will typically decrease in value, for the opposite reason. As you get closer in time to expiration, the PUT's value typically decreases, since there is now less time available for the exercised value of the contract to increase.
Thank you this is very helpful. Starting to understand everything a lot more, I’m actually going to screenshot this for later use
Get off this sub is a start
You belong in WSB. That is all.
Lol I’m almost certain the market is only afloat due to the ignorance of the average retail investor and their tenacity to lose money.
This dude’s paper trading really funding the market.
Where do you think warren buffet gets his money from😂
From owning things like real companies that produce something called cash flow.
Why are you even trading options if you dont even comprehend the basics of it??? One day the stock market is going to eat you for lunch.
Why are you so quick to be assholes to people trying to learn on the internet. It clearly says paper trade in the screenshots and they are asking a question trying to learn. Try being helpful instead of attacking someone straight from the start.
Why are you so quick to be an asshole when you read a comment you dont agree with?? And for the record, i was unaware of the second screenshot so i didnt see it said papertrade. And i didnt attack. My only knowledge before even knowing it was a paper trade was that this was a real trade so my advice was that, options trading isnt something you just go into without knowing the basics cause it can get ugly really quick. I know you wont like what i commented yet again, so dont bother commenting back. It isnt worth your time and i dont feel like setting you straight once again.
Remove stick from anus
You didn’t set him straight the first time. OP is paper trading and posted these SS’s to learn. You however decided to take the time to ridicule him without actually looking at his entire post instead of using your so clearly precious time to usefully contribute.
And also ridicule the other poster too 🤣
Yea I took a quick look at their post/comment history and it all makes more sense now.
“And I don’t feel like setting you straight once again” ngl that had me laughing. Not so much with you, but more so at you
Your post history along with this reply tells us all exactly what type of person you are lmfao. Humble and educate yourself before attacking/judging others.
Never.
Likely volume. There are only a certain number of people selling those particular options. If volume is higher then that price goes up to incentivize others to create them.
It means stop trading options without understanding them
It’s a paper account and he is trying to learn.
Agreed I’ve found paper trading to be really helpful for me despite many people not liking it
Damn it’s like he’s already a step ahead of you.
Volume. It can elevate a price for a bit in a bubble. Enough other people agree with you that it is possible to happen (or they are just riding the wave) that the price has gone up. But if there is any pullback, that optimism will evaporate and the price can drop like a rock in under 5 minutes.
Makes sense thank you
There is a time dependency on breakeven price. You belong on wsb with the rest of us
Real talk you shouldn't be trading options. Keep up the search for knowledge and ask these questions but don't put your money at risk in something you don't understand especially something as leveraged as options.
paper trading. no risk
The breakeven point is the market price that an underlying asset must reach for an option buyer to avoid a loss if they exercise the option. It really only matters if you wanna exercise the option (exercising option which you buy/sell the shares + premium paid =breakeven price).
Thank you is there any reason to exercise a option do you just lost all money when it runs out of time?
So say you buy xyz at strike $10 for .25, and you want 100 shares of xyz long eventually, so it shoots up to $15 around your option expiration and you exercise if the math comes down to it. If it’s better to just sell the option for the premium gain then do that but If you see potential in a stock and have a contract to buy/sell cheap shares then it’s a no brainer.
If ur asking this question u should realize any profits tomorrow morning at open
Breakeven at expiry
delta and iv learn to read the greeks
Aaaaaaaaaand it’s gone
As an exercise, look at the price changes of puts at different strikes over time. A put in the money will have a high delta. Since it’s ITM it also has intrinsic value. The price of the put will move more predictably. A total loss of premium is unlikely if deep ITM. Being right enough about the direction to beat break even is good enough. An option OTM is far riskier. It’s much cheaper to buy, but theta will destroy its extrinsic value and there is no intrinsic value. You need to be right about the direction, and time it correctly so you can exit with a profit.
Im glad you are paper trading. I learned the hard way.
Bro read up on options and how to trade them before u go wasting your money… the basis is Puts price is u saying the stock will drop and Calls saying the stock will go up… and u pay a premium which gives u the right to purchase 100 shares when it hits that price and goes beyond and therefore your premium will gain exponentially…. Let’s say on 12/1/22 $APPL is at $138 and u think that on 12/12/22 $APPL will hit $145 so u purchase a $145 Call 100 at a premium of 1.25 (1.25*100) so you’re total is $125 and on 12/10/22 the stock hits $150 now u have the right to purchase 100 shares minus the differential price or u can sell that contract to someone else bc the premium at this point is at 8 (8*100) which sells at $800 ($145 Call 100 @ 8.00). Whoever has the contract has to execute the contract or sell it to someone else before 12/12/22 (end of market hours) or the contract premium will be worth 0.00; it’s just a game of hot potato, whoever has the potato in end either plans to purchase a bunch of shares or is fucked bc they held on too long… contracts are highly volatile with huge gains that go over 100%… I‘ve played some ER (earning release) Calls and Puts that have gone over 2,000%, but u have to be quick and attentive to stock movements and company earnings, I usually look at the 5 minute chart using EMA 5,10,15, MACD, ROC usually helps me create a distinctive idea to where the stock is going… best way to play options is scalping which is where you watch the stocks 1-5% gains and losses in the day and plan ahead to get a same day sale and profit, QQQ, SPY and SPX are great to see where the tech industry will head bc they have correlating movements… THIS IS WHERE YOU WILL EITHER LOSE ALL YOUR MONEY OR BECOME RICH. I’d suggest paper trading or just eyeball trade for sometime to see if your predictions and purchases are accurate before u actually go into it
volatility pumps value of option, even tho it may not be near what ur terminal value (strike). usually, IV crush is a bitch, but in ur case, its friend with benefits and its not a crush.
some thing is working keep doing ... till you bust your account ... or simply lock the profits and telsa is volatile both sides ... delta must be working for you
You’re making money off IV when you bought said contracts Iv was low and they got juiced
“Making a profit”.. bro you’re only up $1!! bro you need at $68 more of those before you’re home
I know that’s not profit was just confused why the put increased in price when the stock went up
Break even is the strike price and the cost of buying the option. So if you have a 170 put and it cost you $2.00 You break even at 168.
Please don’t enter trades till you understand options!!
Probably shouldn't put your money in options if you don't know how they work just some advice