12 Jan, 13 tweets, 3 min read
Alright, here is the Options Thread many of you have inquired about

Many of you already understand how to buy and sell individual stocks, but few are still understanding how options work

1/

Stock options, put simply, are the ability to BUY or SELL a specific number of shares of a stock at an agreed upon price on an agreed upon date

The agreed upon price is known as the "Strike Price"

The agreed upon date is known as the "Expiration Date"
2/

There are different types of option contracts

1) Call Options
2) Put Options

Each option contract is sold for a specific price called a "Premium"

1 Option Contract = 100 shares

Let's look at a real example
3/

Let's use \$AAPL for our example

June 18, 2021 \$140 call = \$8.85

Expiration Date = June 18, 2021
Strike Price = \$140

This means as a buyer, you would pay \$885 (\$8.85 x 100 shares) for this option to buy \$AAPL shares for \$140 by June 18, 2021
4/

Shares of \$AAPL today trade at \$129, so exercising that option would not make sense, but you believe the share price will increase beyond \$140 before your expiration date of June 18,2021, which is why you are buying the option
5/

Let's say at expiration \$AAPL is trading at \$160. In this case you would exercise your option

You are buying 100 shares for \$140 (strike price)

Those 100 shares today are worth \$16K (\$160 x 100 shares)

Profit = \$16K-\$14K - \$885

You made \$1,115 on the initial \$885 invested
6/

If the price of \$AAPL remains below \$140, you essentially lose your premium of \$885

The option contract is a RIGHT to buy (CALL) or a RIGHT to sell (PUT) shares of a specific stock at a later date
7/

Options trade daily and the price action is usually much more volatile than the regular stock

Many option traders trade the option contract before expiration

Today shares of \$AAPL decreased 2.3%
Today that call option we looked at decreased 10.2%
8/

The opposite goes for Put Options

These types of contracts are purchased when you believe the underlying price of a stock will decrease

Let's use \$AAPL again

June 18, 2021 \$120 Put = \$8.90

Strike = \$120
Expiration = June 18, 2021
9/

In this situation the option holder will pay \$890 (\$8.90 x 100 shares) and the contract will increase as the price of \$AAPL drops

As I mentioned, \$AAPL stock fell 2.3% today but this put option actually increased 16.6%
10/

If the stock stays above \$120, you will lose your premium paid of \$890

If the stock moves below \$120, to say \$110, you can exercise your option, which in this case would be SELLING 100 shares at \$120 (STRIKE), so a \$10/share profit x 100 shares = \$1,000 Profit
11/

Conclusion: Buying call options is usually someone that is bullish on a stock

Buying Put options is someone that is bearish on a stock

Stock Options come with added risk due to there volatility, so one should proceed with caution and fully understand before trading options
Feel free to DM me with any questions you may have

Best of luck!

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# More from @Dividend_Dollar

11 Jan
As a new investor, you may have heard of the VIX, but do not have a good understanding of what it is or how it works

Let me put a thread together to help explain

1/

The VIX stands for the Volatility Index, which was created by the CBOE.

The VIX represents the expectation for market volatility for the next 30 days

Investors often refer to it as the ""Fear Index" 😱
2/

Volatility is described as the price movements up and down in a particular stock and the market as a whole. The VIX is a measurement of the magnitude, meaning how aggressive we can expect volatility to be in the next 30 days 📈📉
11 Jan
Long-Term investors are less concerned with daily and weekly stock performance

Perform Due Diligence to determine your thesis. Invest in high-quality companies with strong mgmt teams & growing TAMs

\$CRWD \$NET \$DOCU \$MWK

Many ask how I know when to sell. To be honest, I do not sell very often

I usually only sell if my original thesis changes for the wrong reasons 1) Strategy adjusts 2) Mgmt Issues, or 3) Other stronger opportunities persist
If a stock drops, but the reasons above are not present, then I see it merely as an opportunity to add more and I continue to focus on LONG- TERM returns

Do not sell out of fear alone……EVER
30 Dec 20
Ready to start investing in 2021, but figuring out where to start?

Let's go over some "Beginner's Tips" on how you cant launch your investing journey

1/

"Education First"

If you are new to the investing world entirely, I always suggest gaining an understanding of how the stock market works

You can do this a few different ways, but this is something that should NEVER leave you.
2/

Greedy learners are the BEST investors
28 Oct 20
Looking at near term averages is a good start I like to use to alert me to begin looking into a stock

5-yr Avg P/E
5-yr Avg Dividend Yield (if Dividends are paid)
5-yr Avg P/S

These are just a few metrics I use to alert me

Here are a few stocks training below their 5-yr Avgs
1/

\$MO

P/E = 8.5x
5-yr Avg P/E = 18.4x

Dividend Yield = 9.3%
5-yr Avg Dividend Yield = 4.7%

P/S = 2.7x
5-yr Avg = 5.8x
2/

\$ABBV

P/E = 8.9x
5-yr Avg P/E = 13.9x

Dividend Yield = 5.7%
5-yr Avg Dividend Yield = 3.9%

P/S = 3.6x
5-yr Avg = 4.5x
27 Oct 20
Don't over complicate things. You don't need to be ultra smart or have some special degree to invest

A great way to invest for those who feel they do not have the time to research or understand, ETFs are a GREAT investment

Look at some of the positions these ETFs own

1/

"S&P 500 ETF"

You can invest in an ETF that tracks the S&P 500. These ETFs are a great way to diversify your portfolio & not worry about trailing the market. Often, professional mgrs are unable to beat the market

Some of the most popular S&P 500 ETFs include: \$SPY \$VOO \$IVV
2/

Here is a look at the top 10 positions of \$IVV

\$AAPL
\$MSFT
\$AMZN
\$FB
\$GOOGL
\$GOOG
\$BRK.B
\$JNJ
\$PG
\$V
26 Sep 20
Beginning your investing journey is one of the BEST decisions you can make during your lifetime

There are some specific "Do's & Don't" for new investors I would like to cover

1/

"Start Early"

The earlier the better, but getting started is the most important

Let's see how you can generate \$1M by age 60. Let's assume a 9% return

20yo invests \$245/mo
30yo invests \$610/mo
40yo invests \$1,625/mo

Starting earlier makes a HUGE difference
2/

"Don't Start Day Trading"

Day trading comes with risks! When starting out, build a portfolio base 1st before adding risk

Day trading takes education and is a difficult way to begin your investing journey

I prefer new investors build a base of ETFs and Dividend stocks 1st!