An Option Buyer Pays for Rights and Avoids Common Short Sale Dilemmas

Day traders want as many options as possible. It is the argument in favor of call options and futures. Investors seek these methods to perpetuate good working relationships and find some deeply-rooted deals. But, are call options flawless?

Call Options

What are call options? In this format, call options allow investors to come in at a certain price and time. For example, a company offers a call option for their stock for the month of July. The call option is priced at $15. The investor buys the right to buy at this price. The call option is likely a fraction of that price or no price at all depending on the agreement and call details.

An investor buys a call option at, say, $1. So, they now have the right to buy a stock for a specific price during a specific time window. If the stock soars to $25, the investor has the right to buy at $15.

Why Do Companies Support Call Options?

These are just numbers. Rarely are the differentials that large, but the point stands. More importantly, stock companies want to offer call options to boost investment intrigue and get people engaged with their offering. It is an option that many investors avoid. They are not interested in the potential of a stock with too many constraints. The process seems needlessly arduous, and it is a fair point. Why bury the purchase in an extra step?

If investors buy a call option, investors will have the right to buy a price at a certain price valuation. This argument is sound, and many investors will fundamentally work in call options. Options have expirations, and that needs to be accounted for.

Call options are good and they are bad. It comes down to how one wants to invest. It is a system that encourages future thinking and savvy investing. Adding the extra step is fantastically rich for investors who want to add an intriguing new variable to their charts. Markus Heitkoetter is a master of this form and strategy. Day traders can learn more about Markus Heitkoetter here, including the details of his strategies and where it derives them from.