help with gambling on a stock

Question

just got my christmas bonus and want to gamble it on a stock. WFC has run up over 30% in the past two months. I want to bet they take a dip. It's trading over 31.25 right now

SO if i was to buy JAN 22 2011 30$ puts, it says they are priced at 0.55 cents

WSC explained this to me once before, but i want to be certain that i understand this correctly before placing the bet.

I think he said you have to buy them in minimum blocks of 100, so let's say i bet 5500 on the jan 30$ puts, what are my possible outcomes, how many puts would i get?

would i have 10,000 puts that would be worth 1.00 if the stock goes to 30$ before JAN 22? and what if it goes to 29 let's say January 10th?

be easy · Answer

just got my christmas bonus and want to gamble it on a stock. WFC has run up over 30% in the past two months. I want to bet they take a dip. It's trading over 31.25 right now

SO if i was to buy JAN 22 2011 30$ puts, it says they are priced at 0.55 cents

WSC explained this to me once before, but i want to be certain that i understand this correctly before placing the bet.

I think he said you have to buy them in minimum blocks of 100, so let's say i bet 5500 on the jan 30$ puts, what are my possible outcomes, how many puts would i get?

would i have 10,000 puts that would be worth 1.00 if the stock goes to 30$ before JAN 22? and what if it goes to 29 let's say January 10th?

wallstreetcappers · Answer

BE,I know you arent interested in my reply but since you brought up something I said, I need to clarify your comments.You can buy 1 or 2 or 5 or 100 contracts, the 100 issue is that 1 contract CONTROLS 100 shares, that is how the put contract works.For every 1 contract you buy, you are controlling 100 shares of stock.The possible outcomes are influenced by not only the price, but time and market volatility. The further out in time you go, the slower the option moves in price since there is more time for the instrument.I know you dont want my comment but you FORCE me to comment..I would go out further in time and try to go in the money with these.So say you had 2000 bucks to "gamble" with (since options really are gambling as we both know) I would at least go out 3 months and try to go in the money, even if that means you get less contracts. It means you have less of a return if the stock does what you want, but it will give you MORE opportunity for success if you go out further in time and try to go into the price of the stock..so instead of the Jan 30s I would try the April 33&#x27;s or whatever. I havent looked at what there is but I would go out in time no matter what and take fewer contracts.

KOAJ · Answer

wall is right about options and going far out on the option...especially if this is a gamble

however, options are more of a trading market and a hedge for a stock position...its tough to get a long term position on an option especially when factoring in the theta (time decay). this is sort of the same argument against a lot of leveraged ETFs

be easy · Answer

why do you think i don&#x27;t want your comment? I&#x27;d actually prefer you parlay your advice with your opinion on the bet, wall. I have no ill will towards you. We disagree for the most part, but that doesn&#x27;t mean i&#x27;m not interested in hearing what you have to say. The converse is true, i&#x27;d rather here opposing opinions so that i can learn something and maybe you change my mind, then a bunch of like minded comments The Feb 31 puts are 1.34for some reason, how this works still doesn&#x27;t make full sense to me. can you diagram out the math so maybe it will click?Like let&#x27;s say i&#x27;m going to gamble 2000$Feb 31 puts are 1.34, so i would get roughly 1500 puts (which i take to mean represents the right to sell the 15,000 shares of the stock at 31 dollars, and i&#x27;m hoping it goes to 30 by february tenth, then what would be my profit?and yes, i understand that there is 100% risk of loss of investment here, If by february 19th the stock is priced at or above 31$, correct?

be easy · Answer

so what do you guys think, do you have the time to peak at the option chain?

If you had 2k to gamble and you wanted to bet on WFC carrying a cheaper price tag in the very near future, what would be your move?

wallstreetcappers · Answer

BE,Put options are probably priced relatively cheap since the market goes up every single day the last 6 months or so.If I were gambling (which I am with this FAZ I keep buying) this is how I would play it.I would buy the Jan 11 35 puts.They are 3.50 in the money, meaning the contract is above the price of the stock, so in the case of the put that is a good thing.The price of the option is 6.50 less the 3.50 it is in the money, so the "real" cost is 3 bucks (300) per contract and it gives you a full year to see how it works out. If the stock goes to 28.50 then you are at the break even point, this is the smartest way to play the option "game".Now if I were gambling I would probably wait until after the first of the year, say the end of the first trading week and then I would gamble with the next strike above the stock price..so if WFC was 32 at the time, I would go to the 33&#x27;s and go to April in time.

ALSNOW · Answer

Look at the Regional Banks a lot of M&amp;A going on there. Many stocks trading at less than half book value and I expect some buyouts there. There was some analyst on Bloomberg today discussing the same thing.  Remember banks don&#x27;t like loaning at low interest rates so increasing rates for these low debt cash rich regionals will be good for business.  If you want a flyer look at BANR,

gamble04 · Answer

be easy,    did you ever end up putting a trade on?

KOAJ · Answer

i would be careful shorting any bank thats "too big to fail"

BAC seems to be expendable in the grand scheme

my long term plays are on the insolvency of the United States and its currency...commodities and betting on spiking bond yields

ALSNOW · Answer

BE,From experience options are a losing proposition unless you are the one writing them.  Yes I&#x27;ve had the huge hits similar to winning a parlay but over the long haul lost big time.  To the point that I stopped buying them all together even when I knew it would be a good leverage trade. Another thing is you need to be watching the stock very closely and IDK if you have the time for that. That said if I was gambling completely on options I would look at those Direxion triple leverage funds.  You buy puts or calls there then you get leverage on triple leverage for some real fast moves.

help with gambling on a stock

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