When will I profit from an option

CodeBreaker528

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I'm confussed,
If I were to purchase a future option that's deep out of the money. Lets say the market was trading @ 8.00 and the premium for a 9.00 call was $200, and the commissions and fees totaled $75. When would I start making money?

Does the future have to pass through the strike price before I realize any profits or will I start to profit once the future price move enough to where the premium rises above $275?
 
Does the future have to pass through the strike price before I realize any profits or will I start to profit once the future price move enough to where the premium rises above $275?

You are trading the option, not the futures. Thus, it's the option price which determines when you are in the money. Of course the futures price will be the major influence on the option price, but that doesn't mean the futures have to go $275 through the strike price for you to start making money.
 
I'm confussed,
If I were to purchase a future option that's deep out of the money. Lets say the market was trading @ 8.00 and the premium for a 9.00 call was $200, and the commissions and fees totaled $75. When would I start making money?

Does the future have to pass through the strike price before I realize any profits or will I start to profit once the future price move enough to where the premium rises above $275?


Stay AWAY from options.
You are almost guaranteed to lose all your money in the long run.
Trade futures, stocks, spot forex, or anything where there is NO time element.
 
I'm confussed,
If I were to purchase a future option that's deep out of the money. Lets say the market was trading @ 8.00 and the premium for a 9.00 call was $200, and the commissions and fees totaled $75. When would I start making money?

Does the future have to pass through the strike price before I realize any profits or will I start to profit once the future price move enough to where the premium rises above $275?


CodeBreaker,

You might want to consider trading Forex since there are no commissions and if you trade frequently intraday, the commission savings are enormous.
 
Thanks for all the comments, even the smart a$$.

I see where I went wrong, I was reading a definition on breaking even when excercising an option, not offsetting.

So in order to profit from an option, the current premium has to be greater than the total amount paid (premium+commisions+fees)?

So, if I were dealing with a grain option where 1pt= $50 and I bought an out of the money option for $200 (4'0), commisions and fees = $75 (1'4). I would need the option premuim to pass 11'0 before I could offset with a profit?
 
11 points at $50/pt = $550
Subtract the initial 4pt option price $200 = $350
Subtract the $75 transaction close = $275 net profit. :)
 
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