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The assumption is that certain politicians and other notable personalities have some kind of insider knowledge that there is going to be an explosive move upward in a particular stock. So, they load up on calls.
I suppose that is within the realm of possibility.
The assumption is that certain politicians and other notable personalities have some kind of insider knowledge that there is going to be an explosive move upward in a particular stock. So, they load up on calls.
I suppose that is within the realm of possibility.
That’s absolutely possible just not limited to political figures
It’s also worth noting what Nancy’s husband has done for a living forever which could increase his exposure to options and insider information
I did well with my stocks last year, but having 75% of my investments in 6 stocks is starting to set off red flags.
As well it should.
Some people with concentrated portfolios will sell call options, also termed writing call options, as a method to generate some cash.
Let's say the price of a stock today is $100, but you are not willing to sell your stock for that price. However, you are willing to sell your stock for $110 - but no one is offering to buy your stock for $110.
But say you can sell an option to someone to buy your stock for $110 anytime between now and a year from now, and let's say that the counterparty pays you $8 to do so (I'm just making up numbers here).
So today, your account receives $8 of cash. And let's say that over the course of the coming year, the stock goes up and down, never going above 110, and then a year from today, the price of the stock is 105. The person who bought that option from you scrapes it off their balance shee (it is worthless)t, and you have an $8 profit for doing nothing whatsoever except waiting.
Again, a very simplified example just to illustrate the basic idea.
Of course, if the price of the stock in question goes up to, say $130, the counterparty will exercise their right and call away your stock for the price of $110. You have $110 plus the $8 you got up front.
Insert complexity, the time-value of money, variability of stock prices, etc, and numerous complications.
No more predictions but Mr. Market is not off to a good start this year.
Thankfully bonds will carry me through what promises to be a chaotic year.
2 days in and you are already predicting the year. You just can't resist can you.
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