| Topic Name: |
ACN Share Price |
| Message Name: |
Annual Price... |
| Date Posted: |
02/09/2006 |
| In Reply To: |
The put option price is 65 cents (for May 30 strike price). So buying 10 puts at 65 cents will cost 650 dollars plus commissions (say about 675 dollars).
So 675 dollars will protect my 1000 shares upto 30 dollars (I don't have any shares, but for someone who does have 1000 shares..).
You can also sell call options to buy your puts (but this will limit your stock's upside). For example you can sell 35 call options for May to buy 30 put options for May. This is also a little advanced strategy and some of you might not understand without detailed explaination.
As for the legal risk, I don't know, but if you are just buying puts to protect your investment, I don't see how that is illegal. But if you are a partner and you know that you are losing a big contract and stock will tumble and you go out and buy like 1000 put options (or even sell short) based on that knowledge, you risk losing your job and may be even going to jail (ask Martha as someone said here). |
| Message: |
The put expires in May. You have to buy new contracts after that. That's where I get the $2800 number.
Again, this is a stupid way to hedge and no professional would ever do this. At the very least you should delta hedge such that you aren't putting an option contract against every share of stock.
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