using options to buy stocks - build wealth with little risk and no capital

[...]... over many years, and I simply did not wish to raise cash by selling any of my winners My few losers and laggards had long since been disposed of and the proceeds used to buy more shares of my better-performing stocks I'm not a short-term, in -and- out investor, but I wanted to keep buying Options seemed the way to go, but as with stocks, purchasing calls requires money What's more, options can only be... intervals for standard equity options are set in increments of $2.50 when the price of the underlying equity (stock price) is between $5 and $25, $5 when the stock price is between $25 and $200, and $10 when the stock price is over $200 Options are ordinarily not available on stocks priced under $5 Strike prices are adjusted for splits, major stock dividends, recapitalizations, and spinoffs, when and if they... have had little time for anything else during their working days and have often spent a good deal of their evenings and weekends conducting research into what trades to enter and when to cover and get out This kind of nerve-wracking, nail-biting, glued -to- theconsole environment is not what I wanted either It then occurred to me that there was a solution to this dilemma There does exist a class of options. .. Although options are typically bought and sold through security dealers and brokers, it is important to understand that options are not securities Unlike stocks, warrants, or corporate bonds, options are not authorized or issued by any company on its behalf Rather, an option is simply a contract between two parties, a buyer and a seller The buyer is often referred to as the owner or option holder, and the... Options to Buy Stocks There's no way around it, buying stocks takes money But by now you've guessed where the money for buying stocks can come from: not out of your pocket but from the premiums accumulated from the sales of the LEAP puts As described in the preface, the purpose of my selling LEAP puts was not just to enhance the cash flow and dividend yield of my stock portfolio Rather, it was to furnish... this book Exercise and Assignment If and when an option holder decides to exercise his or her option to buy or sell, the brokerage firm sends a notice to exercise to the Options Clearing Corporation (OCC), which in turn assigns fulfillment of that option to a current option writer of the same series, on either a random or a first-in, first-out basis The OCC, created in 1972, serves not only as a clearing... Mar Jun A handbook that is particularly useful for dealing with options is the Directory of Exchange Listed Options, available without charge from the Options Clearing Corporation by calling 800 -OPTIONS (67 8-4 667) This directory contains much useful information, including a list of option trading symbols, option cycles, and the exchange (s) where each option trades Page 17 2— Long-Term Options Introduction... bear less risk than standard options, and which, because the underlying equities are comparatively stable, do not have to be monitored with anywhere near the same intensity as standard options What distinguishes this class of options is their long-term expiration date, which permits the market price of the underlying equity plenty of time to recover should the overall market, industry sector, or the... European-style options appears in Appendix A For comparison and reference purposes, the analog at-the-money call premiums are shown in Table 2.2 Intel's stock, for example, has a volatility of about 0.35, so when the stock price reaches $100, an at-the-money put option should command a premium of $829.60 ($8.296 × 100 shares) with six months to expiration and a premium of $1,313.40 ($13.314 × 100 shares) with. .. differences in total commission costs between fullservice brokers and other firms, I prefer to work with options- knowledgeable people at a full-service firm I can readily do this because I am not a short-term investor, and the relatively small number of trades I do per year does not result in significant commissions in terms of absolute dollars This is particularly true when one remembers that in selling options . Pa g e i Using Options to Buy Stocks Build Wealth with Little Risk and No Capital Dennis Eisen, Ph.D. Dearborn™ A Ka p lan Professional Com p an y Pa g e ii This publication is designed to provide. Catalo g in g -in-Publication Data Eisen, Dennis. Using options to buy stocks / Dennis Eisen. p . cm. Includes bibliographical references and index. ISBN 0-7 93 1-3 41 4-5 (pbk.) 1. Stock options Handbooks,. computation of volatility and option premiums for both European- and American-style options. The 1997 Nobel prize in economics was awarded to Myron Scholes and Robert Merton, who along with Fischer Black