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No. of Recommendations: 13
Just friendly warning to anyone that really is new to this board. If you want to learn about Sirius, then read the back posts and see who the regulars are. Please be very wary of cheerleaders that can be all pretty and exciting at the game but never go home with you. (Did I stretch that analogy or what?)

Trolls are people that visit boards to start arguments and bait people into fruitless conversations.

Hypsters are people that sign up for free to try to promote a stock. They are in it for the short term and are looking for suckers to buy 'cause they told them to.

This is Fooldom and most of us are safe, but we do have the free trial thing and people get in. Take care and study.

Buffy (who hopes this doesn't offend the people it wasn't intended to offend...)
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Thanks Buff,
well said.


Julie
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Yeah. What she said.

...and, oh, by the way, SIRI is going TO THE MOON! It's the next Microsoft (only BIGGER). You've GOT to BUY BUY BUY now!

Stick $1000 in this little puppy today and you will most like be a BILLIONAIRE in a few months!

/sarcasm off
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Ooops, Buffy. Just looked at your profile and realized that you are a he (and not a "she" as I referred to you in my previous post).

Sorry about that.
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"...and, oh, by the way, SIRI is going TO THE MOON! It's the next Microsoft (only BIGGER). You've GOT to BUY BUY BUY now!"

Whoa! I think you are too optimistic on this one. True, SIRI and XM have a lot of upside potential, but it is limited by the fact that these two companies will never be able to expand beyond the US market. Maybe they can grab some market share on the hardware (receiver side), but as far as services go they're US only with possibly a small piece of Canada and Mexico. The limiting factor of not being able to expand to other world markets, shoots down the "Next Microsoft" theory.

Scott
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Sarcasm is lost on you, Binky! :)
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I'm new to these boards, but I am neither a troll nor a hypster. I signed up for a year. I felt that most of the people on the boards seemed to know what thay were doing and possibly day traders. I thought I could learn something. Although I question some peoples motives. Maybe there trying to instill fear so the stock will go down so they can swoop in and buy them up.
I am a person who invested in the 90's , but because of luck got out before the ax fell in 2000. Put money in real estate. Now i'm getting back in with small bits of money buying more speculative and cheaper stock.
This time I'm trying to educate myself by doing online research. I'm also trying to read books on options. It's so complicated (I dont think i'll be able to decipher without tutoring)! It's all very facinating, but all the analysts have differing opinions. I think you have to go by your gut instincts. No one thought I should by those apple shares at 22 but there now at 64.50
Karen
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"I'm also trying to read books on options. It's so complicated (I dont think i'll be able to decipher without tutoring)!"

Remember staring at grade 6 maths when you were in grade 3, and realising 4 yrs later how simple the grade 6 maths is. Well its the same with options, the complication lies in your mind not in the equation.

If you can clear your mind a little bit and look at options as a market place (Walmart for example): There are three elements involved in your transactions at Walmart - 1) You the buyer, 2) The Cashier, and 3) The Seller(Walmart). Also remember there are assumptions in every equation, i.e. there are rules governing every trade or game. We'll make three assumptions: 1)Prices @ Walmart are NEGOTIABLE, 2)Only you have the power to buy and sell - upto the time limit provided to you by the Cashier 3)Also you are responsible for paying the Cashier's salary, not Walmart. (Don't runaway yet! I will piece together the various parts after telling my story)

Now you drove down to Walmart and you want to buy a bicycle. The bicycle is priced at $100. Based on your experience you know that prices are usually low on black Fridays. Well if the bicycle is selling at $100 today that means the price might go up to $150 by monday next week. So if you buy a bicycle today you can turn around and sell for $150 tomorrow. However, there is one drawback to your plan, you only have $20 in your wallet. So you go to the Cashier and bargain to buy the bicycle at $150 using options. Makes no sense right, but don't forget you are not the only one in the market place. Also realize that not everyone has your superior knowledge.

So based on demand and supply you buy an option to purchase the bicycle @ $150 by the 3rd Friday of the month @ .20cents/share (1 contract = 100 bicycles = .20 cents x 100 = $20). Another rule I forgot, you can only buy options in bulks of 100). So instead of 1 bicycle you've ended up with 100 bicycles! you're about joining the millionaire's club.

Come monday the cost of the bicycle goes up to $150, at this point the cashier informs you that someone is interested in buying your option (mind you the option not the bicycle) @ $20/share, (again like our calculation above - 1 contract = 100 bicycles = $20 x 100 = $2000) so the initial $20 in your wallet is now worth $2,000.

At this point are you going to take the $2000 and run or do you wait till the 3rd of the month to buy 100 bicycles @ 15,000? You never intended buying 100 bicycles and you don't have $15,000 to buy 100 bicycles. Ofcourse you are going to take $2,000 and run.

Now do you get the picture? What if the cost of that bicycle fail to $95 instead of your expected $150. Are you going to buy a bicycle selling at $95 in the open market for $150? The answer I believe is a capital NO! So under this scenerio what happened to your $20 investment? It's gone! Because your bet went the wrong direction. Walmart called the Option Writer took your money. Just as you took his/her money when the bicycle went to $150, because even though the bicycle was selling for $150 Walmart has no right to sell the bicycle, remember our assumption that only you has the power to sell or buy.

Practice! Practice! Practice! thats your best hope of learning.

EM Umunna
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This time I'm trying to educate myself by doing online research. I'm also trying to read books on options. It's so complicated (I dont think i'll be able to decipher without tutoring)! It's all very facinating, but all the analysts have differing opinions.

Well, you came to the right place (the Fool) to figure out your investing strategy. And you are right, all the analysts seem to have different ideas. If you look at most of them, they are attached to some brokerage or other...churn is what makes them money. They need people to invest/sell/invest/sell so they make ratings on stocks.

I think you have to go by your gut instincts.
Sprinkle with a large dose of education and research and you could make millions with this recipe....;^)

Buffy (who figured all the new people weren't bad...)
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This is Fooldom and most of us are safe, but we do have the free trial thing and people get in.

Don't think the free trial includes posting rights, does it? These jokers actully pay to post this crap.

That being said, the effort is ridiculous anyway. Pump and Dump isn't going to work on a stock as widely traded as SIRI anyway.

- Tom
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You explain it in a very easy and enjoyable way! I do know what a put,and a call are. I know there are stradles and I think there called butterflies. i have read the strategies and understand the concepts.I know you're buying an option that rarely people excersize. I know that its used for insurance and sometimes if the option is a good deal you may excersise your right to buy it. I even know what a naked option is-Its the caculations, the math and reading and deciphering the numbers.
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Alex,

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.

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



Cliff,

I think I need to understand more before I do any of it. I need to figure out how to know if the option is worth buying-is a good bet, a good value and probability of a return.Theres calculations that can figure that out and software programs. Theres people out there that are geneius at the game and they would love for me to get in it not knowing what I'm doing. Im still confused about what is in the money or out of the money and what that really means. Also how to figure out if the option is in the money etc.

Karen(of the alexkarenzen)
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Options have a time value and an instrinsic value. If the option were to expire right now and it is worth somehting, then it is In The Money.

When you get into options, your emotions will be amplified 10-fold. Options go up and down a lot and personally I do not recommend it. You need a strong selling discipline with options. If you find yourself doubling up everytime the stock moves in the wrong direction, you will lose your money.

Also, options are not very liquid. You have to buy at the ask and sell at the bid and that could be a 10% spread just right there. So you already start out losing.

I lost a huge, HUGE.... percentage of my portfolio (90+%) by getting into options. The losses and profits will come extremely quick and you may justify it as an opportunity to double up.

I think just buying the common on margin is a much better way to leverage yourself. NO PREMIUMS and lots of liquidity.

Personally, its a complete crap shoot and you don't know if it's even your rolling 6 sided dice.

I'm doing well trading stock right now. My plan is to not buy options now but planning on writing covered options once I establish a large stock base.

rruyy





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<<<<Theres people out there that are geneius at the game and they would love for me to get in it not knowing what I'm doing. Im still confused about what is in the money or out of the money and what that really means. Also how to figure out if the option is in the money etc.>>>>


Karen,

The first time I bought a call, I didn't know the difference between a buy to open, buy to close, sell to open, or sell to close. All I knew at the time was that FARO was short-time over bought (another jargon; meaning the increase in share price was not justified). So I called my broker - Ameritrade - and informed him what I wanted to do. I knew I wanted to buy a put but didn't know whether I should buy-to-open or buy-to-close and also what strike price I should open my position with? I bought an in-the-money put with $800 within 2hrs my money had grown to $1300, I sold for a $500 gain. I did the same with CECO this time a call and made $1600 in two days. Then I got greedy and did the same thing with NT, this time I invested $4,000 on a Call hoping to turn it into $16,000. Well if you have been following Nortel you know the story of how it went from $7 to $4.50 in less than 1hr. So I lost all my gains.

There is no genius in options trading. I've been doing options for over two years now, I don't think I know better about how a stock is going to behave now than then. I have improved my ability on how to read charts and trends. I still get surprised once in a while. Now I do a lot of combinations of calls and puts both writes and buys. One thing I've been able to learn is how to limit my risks and maximize my profits. Uptill today I'm still learning and one day I'll have my own newsletter on Options investing.

Cliff is right you should not think of writing options if you are new in the game. When buying options you invest only what you can afford to loss. Just like walking into a nightclub with $400 in your wallet and knowing that you are going to spend all of it tonight.

Good Luck!

EM Umunna
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<<< I lost a huge, HUGE.... percentage of my portfolio (90+%) by getting into options. The losses and profits will come extremely quick and you may justify it as an opportunity to double up.>>>

rruyy,

That wasn't very smart; investing 90% of your portfolio in options. I'm glad you are still with us. I like your courage, I wish I can shut my eyes and just put 50% of my portfolio in something like SIRI or TASR and double my portfolio in one day. But that is not investing, it's the same as playing black jack or a jackpot.

You don't need to have a lot of money to write covered calls or puts. Right now if you think SIRI is going to fall to $4/share by Jan. You can buy a Jan Put and write a Dec put at the same time or if you think it's going to 50% in either direction, you can buy a Jan straddle wait for the stock to move and write your call. In both strategies you can still loss money but your loss is limited. If you are interested in learning more about my ThreeLegFool Option Strategy send me a direct e-mail through the post.

EM Umunna (ThreeLegFool)
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I'm doing well trading stock right now. My plan is to not buy options now but planning on writing covered options once I establish a large stock base.

rruy,

From what I understand , you dont need the big portfolio. You can write naked options and puts. The probability of winning is better. You can cover your but by doing a naked put and a naked call. And anything in the middle is a profit. Also you have to know when to buy back your own options so you dont risk losing very much. I've been reading a book called "The complete options player by Kevin Troester.

I understand what you're saying about losing your shirt. The book gives ways that minimize that. However I do not feel confident enough to jump in that game . i am trying to figure out a way to make money weekly or monthly. I dont have a lot to play with and I'm doing it in bits and peices with small amount of money. But so far the stocks i.ve bought I feel compelled to hold on to. aapl, luv,siri,etc.Have you ever bought penny stock? Can it be lucrative to research a stock,buy at a penny a share and stop limit sell at 5 or 7 cents?
Karen
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Em Umunna,

I would love to learn anything you want to teach me. I am really touched by how
willing people are to share there knowledge. Dec puts and january puts all at the same time ,I dont understand the value of one verses the other. Dec has less time value-or is it intrinsic value. How to interpret differing values and worth and how to cash in, I just dont get yet.

I have seen from the boards that you know what your doing.
What wisdom can you impart on me Obi Wan KaNobi ?!
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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 totally agree. I started this way, and still buy and sell no more than 3-5 contracts. Small change, but very effective way to make more money than in the actual shares.

My caveat is that you should know your stock very very well. I have been doing this for almost 2 years, and still only trade ioptions on 2 stocks. (XMSR and AAPL). Just 2 weeks ago I took a leap and purchased several contracts of SIRI calls. (Did it right before Mel came aboard, so saw a nice jump fairly quickly.) My $190 per contract is up to $3.30 per as of yesterday.

The other caveat for me anyway is to buy on contracts that expire some year or more away. This is called the time premium and for me, helps me avoid the stomach upset of day-to-day volatility.

{To trade options my brokerage needed a separate agreement signed and in place before I could trade. Also the commission is higher, $29.95 as opposed to the usual $19.95}

Julie
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That wasn't very smart; investing 90% of your portfolio in options. I'm glad you are still with us. I like your courage, I wish I can shut my eyes and just put 50% of my portfolio in something like SIRI or TASR and double my portfolio in one day. But that is not investing, it's the same as playing black jack or a jackpot.

You don't need to have a lot of money to write covered calls or puts. Right now if you think SIRI is going to fall to $4/share by Jan. You can buy a Jan Put and write a Dec put at the same time or if you think it's going to 50% in either direction, you can buy a Jan straddle wait for the stock to move and write your call. In both strategies you can still loss money but your loss is limited. If you are interested in learning more about my ThreeLegFool Option Strategy send me a direct e-mail through the post.


In hindsight it wasn't smart but I didn't put down 90% of my money on calls and lose it at once. I started out like everyone else by playing it safe. I started buying XMSR calls and 5% of my account became 10%, then 20% then 30% then 50%. And to me it was a practically a sure thing. Well one day I got involved with RMBS which I thought was another sure thing and I started buying calls again. It went well for a while and then a bastard judge started screwing the company. As the company went down I sold my other stocks and started loading the boat with RMBS calls and the common. Well, the problem is that it kept going down and I got stuck on a very destructive cycle. I didn't have the DISCIPLINE that I thought I had.

I know you don't need a lot of money but I'm not going to sell covered calls on stock that is cheap. Once I think its getting too expensive I will start selling the calls. But I'm up 200% since my low so I'm happy about that. Just making sure I follow discipline this time.

rruyy
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Julie,
If you do online trading you can get an account with Scottrade you can do market orders for 7 dollars stop limits for 12. Options are the same plus 1.50 per contract. I'm calling monday to see if I can switch my whole portfolio there. It s costing 65.00 at Morgan Stanely to make a transaction.. They did not give me any advice that I could not find online through yahoo or msn. So I opened a Scottrade account.
Karen
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ThreeLegFool, I'm trying to get into puts, calls and straddles. Send the info to emagruder@hotmail.com TIA
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Thanks for the scenario.
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i have read all your emails on calls and options
i m still trying to understand how it works
it seams easy but it s not or maybe i need to dig into into some more
i do believe in siruis in fact i owned over 4000 shares of it


so lets say i want to " have fun "with options or calls
take $500 dollars and "play" with it
since i believe it s going up till after chritmas then down mid jan
can some one show me the scenario on how to go with that $500 ?

( broco lee who believes in xm and sirius because regular radios suck )
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No. of Recommendations: 2
Options are the right to buy and sell shares at a certain price by a 
specified date.  A call is the option to buy and a put is the option to
 sell.  You can buy and sell both.  Options expire every 3rd Friday of
 every month.  You can buy options for different months or even a few 
years out.  Obviously the further out you go the more expensive they 
will be.

I will explain buying calls because this is what most people start out
 doing.

For Siri the Call option prices for next January are as follows, as of last Friday

Strike Symbol    Last   Chg   Bid    Ask    Vol    Open Int 
2.50   QXOAZ.X   4.00  0.30   4.00   4.10   111    35,961 
5.00   QXOAA.X   1.70  0.20   1.70   1.75   3,382  78,211 
7.50   QXOAU.X   0.50  0.00   0.45   0.50   6,860  40,889 
10.00  QXOAB.X   0.15  0.05   0.15   0.20   843    16,150 
12.50  QXOAV.X   0.10  0.05   0.05   0.10   454    5,260 
15.00  QXOAC.X   0.05  0.00   N/A    0.05   55     1,330 

Each option contract is for 100 shares so if you want to buy 1 contract 
of $7.50 January 05 calls that means you have to pay the ask *100 per 
contract which in this case would be $.50 * 100 = $50.  So for $50 
dollars you buy the right to buy 100 shares of Siri at $7.50 by the 3rd
 Friday in January.  

So with $500 you can buy 10 contracts which have a controlling interest 
of 1000 shares.

Now, if by the 3rd friday in January the price is $7.50 or less you 
will lose ALL YOUR MONEY.   If the stock closes at $8.00 you will come 
out even because you paid a .50 cent premium.  If the stock closes at 
$8.50 you will make 100% or your money.  If the stock closes at $9.00 
you will make 200% of your money.  Every next .50 cents is another 100%
 of your initial investment.


For betting on short time frames it is not much different than going to
 Vegas and playing War or betting Black or Red on the roullete.


rruyy 

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Just friendly warning to anyone that really is new to this board. If you want to learn about Sirius, then read the back posts and see who the regulars are. Please be very wary of cheerleaders that can be all pretty and exciting at the game but never go home with you. (Did I stretch that analogy or what?)

This analogy is not a stretch. It was my high school existence. It definitely makes perfect sense. However, the happy ending has me married to a former cheerleader from another school. Life is good and

OFX (who likes XM shares long-term and hasn't had the nerve for SIRI, yet) Insert self-kicking motion here.
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Just friendly warning to anyone that really is new to this board. If you want to learn about Sirius, then read the back posts and see who the regulars are. Please be very wary of cheerleaders that can be all pretty and exciting at the game but never go home with you. (Did I stretch that analogy or what?)

This analogy is not a stretch. It was my high school existence. It definitely makes perfect sense. However, the happy ending has me married to a former cheerleader from another school. Life is good and warning heeded.

OFX (who likes XM shares long-term and hasn't had the nerve for SIRI, yet) Insert self-kicking motion here.
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Just friendly warning to anyone that really is new to this board. If you want to learn about Sirius, then read the back posts and see who the regulars are. Please be very wary of cheerleaders that can be all pretty and exciting at the game but never go home with you. (Did I stretch that analogy or what?)

I'm pretty new to the fools board. Sirius has been a great ride. Ive got an 8.00 limt order in. I hope I can get back in when the downtrend happens. These are my favorite boards with the best people,(Buffy, Tim,3leggedfool). I plan to stay on these boards. There are valuable things that i am learning from everyones experiences-good and bad.

Karen
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Luv ya too.
Glad you are going to stay. Many riches to you in your future.

Buffy (who joined way back when it was free...)
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Luv ya too.
Glad you are going to stay. Many riches to you in your future.

Ditto dude!
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