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Subject:  Re: Watch out for Trolls and Hypsters. Date:  11/27/2004  2:01 AM
Author:  careinke Number:  2863 of 10887


You have a good start towards understanding options. As far as the math. Multiply the Bid or ASK by 100 that will give you the actual cost of one option. So if an option has a bid of $2.00 and and ask of $2.50. The price for the bid is actually $200 dollars and the Ask is $250 dollars.

The confusion is they list the price as the cost to control 1 share of stock. But, a single option contract covers 100 shares of stock.

I would suggest you buy a real put or call to try out the proccess. Nothing will make it clearer than actually doing it.

I would stay away from writing a put or call untill you have a little more experience with options. Writing options is much more dangerous than buying options. Your downside risk for buying options is the cost of the option. Your downside risk for writing options can be unlimited.

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