First,
When it comes to options trading, there is more risks and flexibility, and everyone should acknowledge that. Each one of you have to take responsibility for your trade and understand your limits. Greed is not good!
Stocks and Options are two different subjects. Owning stocks mean you own a piece of the company. Option is a contract between two parties (Buy or Sell). Option buyer has the right to buyor sell a fixed quantity of the underlying asset at fixed price, which called strike price “On or Before” option expiration date. If the selected contracts do not reach the price or head to the direction you want it to be, please evaluate your position and cut losses instead of holding it. By cutting losses, you will have the opportunity to re-enter another trade. In options, your contracts will expire in a fixed date, and if you don't reach the strike price before it expires, your broker will automatically sell your contracts before the market close on that day. Please do your own due diligence instead of following others’ options trading signals.
The Undergraduate Trading Society at UCSD empower students to TRADE the financial markets instead of investing. Options is considered as “trading”. Warren Buffett, who is noted for value investing, holds the stocks and expect it will raise in a long term, which is considered as “Investing”. In my opinion, it is unrealistic to invest like Warren Buffett as a student since we don't have the capitals he has. Therefore, UTS promotes the idea of trading the financial markets instead of investing.
Terms you need to know before you start trading:
Strike Price: the fixed price is the price at which a call or put option can be exercised.
ITM: In The Money, which means “Intrinsic Value”. In the money is when the current stock price is higher than the strike price.
ATM: At The Money is when the stock price is close or equal to the strike price.
OTM: Out The Money is when the current stock price is lower that the strike price.
Delta: measure the degree to which an options is exposed to shift in the price of the stock
Vega: measure the sensitivity of volatility of the underlying asset
Theta: measure the rate in the value of an option decline due to time decay
Gamma: measure the rate of change in Delta
Good luck and happy trading!
Zhiyao Li
Vice President and Head Options Trader