By John J. Murphy

Attempting to alternate inventory, bond, commodity and forex markets with out intermarket know-how is like attempting to force a vehicle with no searching the facet and rear windows--very risky. during this advisor to intermarket research, the writer makes use of years of expertise in technical research plus huge charts to obviously exhibit the interrelationshps that exist one of the a variety of industry sectors and their value. you will how to use job in surrounding markets within the comparable method that almost all humans hire conventional technical symptoms for directional clues. exhibits the analyst tips on how to concentration outward, instead of inward, to supply a extra rational figuring out of technical forces at paintings available to buy.

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You are obligated to deliver the 100 shares of stock at $40 per share. This is $6 per share below current market value. Although you received a premium of $200 for selling the call, you lose the increased market value in the stock, which is $600. Your net loss in this case is $400. Example: Given the same conditions as before, let’s now assume that you did not own 100 shares of stock. What happens if the option is exercised? In this case, you are still required to deliver 100 shares at $40 per share.

In this situation, you can sell the put and accept a loss, or hold onto it, hoping that the stock’s market price will fall before the put’s expiration. Example: You bought a put three months ago and paid a premium of 4 ($400). You had expected the stock’s The Put Option market value to fall, in which case the put’s value would have risen. Expiration comes up later this month. Unfortunately, the stock’s market value is about the same as it was when you bought the put, which now is worth only $100.

If you’re right and the price falls, your puts will gain in value. Thus, the difference between stock investors and options traders is the reaction to news. Stock investors tend to view bad news—weakness, negative economic news, overpricing of shares, corporate scandals, and so on—as just bad news. An options trader, though, can use any form of news to make a profitable move in options, even when the news is negative for the company and its stockholders. Smart Investor Tip Selecting options wisely depends on also identifying or picking stocks using logical criteria.

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