In this module, you’ll learn how to trade a ‘long call’ and a ‘long put’ through a couple of real examples.
We’ll walk you through the process looking at the background of the trade, the market outlook, choosing an expiration date and so on. And you’ll see how a trade develops.
We use Facebook as an example for a long call… …a small cash outlay can be a main motivator in a strategy. In order for you to understand the process, we’ll review two trades. Both will be reviewed in terms of how to go about choosing an expiration date and a strike price.
We’ll review the gain / loss and also take into account ‘exercise’ and ‘assignment’. And after we’ve summarized both trades, we’ll give you a short quiz on each.
Long put, long call – how do they work?
Review ‘MG’ – maximum gain and ‘ML’ – maximum loss.
What does the ‘options chain’ look like?
Choosing the strike price ‘in the money’.