The option market is the stock market’s
central nervous system.
How an Option Contract and
Underlying Stock are linked:
One Option Contract = 100 Shares of Stock
Options are “Derivatives” – meaning they “DERIVE”
their value from the underlying stock.
An option is just a paper contract.
That contract must be LINKED to a
stock of some company, which is called the
UNDERLYING STOCK.
Underlying stock: “Without me, you’re nothing!”
Question:
1.An option contract and an underlying stock are linked because:
A.___you receive 100 options for one share of stock
B.___an option and a share of stock cost the same
C.___an option is derived from the stock share price.
THE SECRET
Buy a Company’s Stock Who You Like —
and Who You Wouldn’t Mind Giving Your Credit Card To.
The underlying stock and option move together.
Where the stock goes, the option follows.
Question:
2.The underlying stock and the stock option:
A.___move together
B.___each go their own separate ways
C.___are not related in any way.
A popular selection method is to use a one-year
“rolling stock chart” and select options as the stock dips,
confident it will peak back up.
Pass on stocks that are just chugging along
in a bumpy horizontal straight line.
Keep it simple – To find out the weather;
why use barometric pressure, moon signs, or a meteorologist
–when you can just look out the window?
Question:
3. What is one secret to selecting an underlying stock?
A.___A tip from an employee in Walmart
B. ___If the stock is a Penny stock
C.___ Stock share price has fluctuated in the last year.
BEWARE OF CONFUSING CONTRACTS AND SHARES!
One Option Contract = 100 Shares of the Underlying Stock.
100 Option Contracts = 10,000 Shares of Underlying Stock!
Question:
4. Ten option contracts equal:
A.___ 10 shares underlying stock
B.___ 1,000 shares underlying stock
C.___ 10,000 shares underlying stock
Answers: 1 –C; 2 –A; 3 –C; 4 — B
CVS and Walgreens Duke It Out !
Each week I analyze a HOT stock/option pick,
with a touch of animated humor, and explore
behind the scenes influence on the stock price –
facts for the savvy trader to overpower the
Wall Street bull and make extra money!
To Take a Look – Just Click Here:
