Brokereviews Answers
Brokereviews helps stock market and cryptocurrency investors find answers to their questions and the information they need to make smart trading decisions.
Recent Answers
Should I Buy Pre-Market or Directly After the Market Has Opened?
Many people prefer to buy stocks after the market has opened to get the actual prices instead of pre-market prices. One of the main reasons why it might be better to buy after the market has opened is that many times, stocks tend to reverse their pre-market moves. Experienced traders will tell you that many times a stock may trade higher or lower pre-market, posing a significant gap up or lower at the open, only to reverse course and head in the opposite direction. Traders who bought or sold at the open may be left with significant losses after the open. The pre-market session is mostly dominated by big institutions such as the major investment banks and hedge funds that trade in dark pools and have different goals than retail traders. Some institutions might be buying or selling stock to hedge other positions and may not be particularly interested in the stock. On the other hand, most retail traders buy stock to profit from gains in its share price and sell stock to profit from further declines in its share price. Therefore, it is always advisable to buy shares after the markets open as a retail trader.
Asked 3 years ago
Can You Sell Call Options When the Market Is Above the Strike Price and Take Profits?
The short answer is yes, you can sell your call options for a profit if the market is above your strike price. To answer your question fully, a person buys a call option expecting the price of the underlying stock to start rising, which in turn raises the value of the call option. However, in order for you to book a profit after selling the call option, the price of the underlying share has to rise past a certain point known as the breakeven point. The breakeven point is simply calculated by adding the premium you paid for the option to your strike price. For example, let's say you bought call options for a stock trading at $10 with an $11 strike price and a six-month expiration window for $2 per share. You will pay a $200 premium because options are usually sold in lots of 100 shares. To make a profit on your options trade, the underlying shares have to rise up to $13, which is your breakeven point. Any gains past $13 will be your profit. So if your shares are currently trading at $15, the value of your options will rise to $400, but you have to subtract the $200 premium you paid to arrive at a $200 profit.
Asked 3 years ago
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