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Sure if it's a stop-limit, that is, the amount it falls before you sell as to minimize your loss.
Learn to read the stock chart, the oscillators and indicators. If you practice most of time you can predict where it's going to go but not 100%. All this needs to get taught as a basic skill such as changing the tires and oil, building a computer, typing, self-defense, and other things you need to know. Unfortunately, most of what you learn in school just useless.
why not do it the "slightly" more complicated way?
Buy it at the current price, and sell an option at $90 strike. If it hits below $90, you end up keeping the shares since no one buys them from you, and you end up buying them for $90/share. If it stays above $90/share, you go ahead and let someone buy them and collect the "interest" payment on it
nothing is really "lost", I know people who argue that if the share price drops, you lose out, but how? If you were going to buy it anyways, whether the price drops or not, it would have affected your portfolio in the same way
main thing is losing out on the upside, what if it went to $120 and not fall to $90? But if OP feels like it is over priced at $100, he wouldn't buy it anyhow at $120 so... he doesn't "lose" something he never bought in the first place
I think using limit orders is a good idea. But you have to understand the risks.
If you are selling you could have your sale make at a much lower price.
If you are buying you might miss the purchase by a few pennies.
If you need to make the trade then a market order might be the way to go.
Say something you are interested in is going for $100/share. But you don't feel it's worth more than $90, so you place a limit order to buy for $90, good until cancelled.
What's the consensus, pros/cons, on using limit orders in this fashion? Thanks.
Sure if it's a stop-limit, that is, the amount it falls before you sell as to minimize your loss.
Learn to read the stock chart, the oscillators and indicators. If you practice most of time you can predict where it's going to go but not 100%. All this needs to get taught as a basic skill such as changing the tires and oil, building a computer, typing, self-defense, and other things you need to know. Unfortunately, most of what you learn in school just useless.
You also need to know the difference between a sell stop and a sell stop-limit
why not do it the "slightly" more complicated way?
Buy it at the current price, and sell an option at $90 strike. If it hits below $90, you end up keeping the shares since no one buys them from you, and you end up buying them for $90/share. If it stays above $90/share, you go ahead and let someone buy them and collect the "interest" payment on it
nothing is really "lost", I know people who argue that if the share price drops, you lose out, but how? If you were going to buy it anyways, whether the price drops or not, it would have affected your portfolio in the same way
main thing is losing out on the upside, what if it went to $120 and not fall to $90? But if OP feels like it is over priced at $100, he wouldn't buy it anyhow at $120 so... he doesn't "lose" something he never bought in the first place
As someone who isn't well versed in options trading, can you expand on this theory and scenario?
I don't quite follow what you're executing as far as trades go?
why not do it the "slightly" more complicated way?
Buy it at the current price, and sell an option at $90 strike. If it hits below $90, you end up keeping the shares since no one buys them from you, and you end up buying them for $90/share. If it stays above $90/share, you go ahead and let someone buy them and collect the "interest" payment on it
nothing is really "lost", I know people who argue that if the share price drops, you lose out, but how? If you were going to buy it anyways, whether the price drops or not, it would have affected your portfolio in the same way
main thing is losing out on the upside, what if it went to $120 and not fall to $90? But if OP feels like it is over priced at $100, he wouldn't buy it anyhow at $120 so... he doesn't "lose" something he never bought in the first place
What you have described is selling covered calls. It might be helpful to others to label what you are describing
The OP does not seem well versed with options, so he should probably avoid that strategy. When buying and selling stock, I always use limit orders good for the day. Using market orders is very risky. You can get screwed badly.
I bought a stock once that was trading at $8 per share, then it rose to $10, and I sold. On paper, I had a 20% return, but I used a market sell order. It wound up filling for $9 barely and wiped out half of my return. When factoring in brokerage fees and commissions, my total ROI was maybe 7-8%. Had I used a limit order, I could have sold for $9.95 and kept most of my return.
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