Stock options Confused

1 contract is 100 shares. So you are buying 80 contracts.
Maximizing the profit by buying call spread at 1 dolalr gap.

Quote from PRINTABLECOUPON : Confused about options so have a few questions Supposed I predict a stock will go from 1.25 to 2.25 I have 10 k to spend on the stock to get the most money possible. If I buy the stock I get 8000 shares for the stock at 1.25 and If i sell it I get 8k In profit. Now if I buy an option according to http://www.optionsxpress.com/abou...sions.aspx I still have to pay 1.25 per option and if they expire I dont have anything. Am I missing something about options and how to maximize situation'?

The ratio of contracts:shares isn't 1:1. Also, you can buy and sell options on its own market (this is kind of the point). In other words, if you have a call option (allowing you to buy stock or CALL it away from someone) at 2.25 on Jan 11 (just picking a random date), and market price of the stock on the days leading up to the expiration date is 4.00, you now have a valuable option because it lets the owner save large amounts of money on the stock purchase. OTOH, if the market price is 1.50, you'll let your option expire and you only lose out on the money you paid for the option.

To answer your scenario:
If you predict a move from 1.25 to 2.50

Depending on the volatility of the stock, the $1 option will likely be priced lets say at 50 cents. It is 100 shares per option, (multiply 50 cents * 100) so it is $50 per contract.

Your commission from this broker will be $1.25 per contract.

So your up to $51.25 per 100 shares, starting at $1. Doing the math for $10k, this allows you to CONTROL 19,512 shares of this stock. (Over twice the amount than buying stock straightforward) And yes, if it goes below $1 you lose your money. That is the tradeoff.

Now if it goes to $2.50 as predicted, each $1 option you own will be worth $1.50 (1+1.50=2.50), or $150 each contract. Total value at this point is $29,250. Subtract the $10k you started with, you just made $19,250..

Quote from kyotuosa : 1 contract is 100 shares. So you are buying 80 contracts. Maximizing the profit by buying call spread at 1 dolalr gap.

Is call spread different from a option contract or is it just a version of it?

Quote from ihazaname : To answer your scenario: If you predict a move from 1.25 to 2.50 Depending on the volatility of the stock, the $1 option will likely be priced lets say at 50 cents. It is 100 shares per option, (multiply 50 cents * 100) so it is $50 per contract. Your commission from this broker will be $1.25 per contract. So your up to $51.25 per 100 shares, starting at $1. Doing the math for $10k, this allows you to CONTROL 19,512 shares of this stock. (Over twice the amount than buying stock straightforward) And yes, if it goes below $1 you lose your money. That is the tradeoff. Now if it goes to $2.50 as predicted, each $1 option you own will be worth $1.50 (1+1.50=2.50), or $150 each contract. Total value at this point is $29,250. Subtract the $10k you started with, you just made $19,250..

Thank you repped. Cant rep you yet but thank you.

whats the stock

there are a couple of them but i was wanting to invest in jamba juice sometime in February I think it'll hit 1.25-1.40

If you're more interested in options, I recommend Understanding Options [amazon.com] book. It does a great job of going over all the basics about options, while still being very easy to understand.