Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: JustMee01 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 27546  
Subject: Re: Re: terminology Date: 11/6/2012 9:00 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Dusty,

Options are a little confusing at first. They've sold January puts on Startbucks, with a strike price of $47.

A "put" is an options contract that allows the buyer to forcibly sell 100 shares of the underlying stock.

The seller of the put will receive those shares (and pay for them of course @ the strike price), if the contract is exercised.

In exchange for that risk, the put seller receives a small payment, that's paid by the buyer.

That $47 is the strike price (the price at which the contract executes). Above the strike, there won't be any execution. However, if SBUX falls below $47, the buyer of the put will sell SBuX and receive $47 for the 100 shares.

The "JAN 2013" is the options contract month. That's the date that the contract ends. After that date, the contract is null and void.

Someone who sold these fairly short term puts would characteristically be bullish on the stock and looking for a little income. Selling puts can generate some cash on the side. In order to accept the risk of being put to, they must however, be willing to own the stock. Therefore, I'd have to conclude that they're bullish on SBUX long term, but think it will trade flat for the next couple of months.

Peter
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement