38 lines
1.1 KiB
Plaintext
38 lines
1.1 KiB
Plaintext
10 • The Intelligent Option Investor
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Jargon introduced in this section is as follows:
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Call option Moneyness
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Put option In the money (ITM)
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Range of exposure At the money (ATM)
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Strike price Out of the money (OTM)
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Gain exposure Premium
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Accept exposure American style
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Canceling exposure European style
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Exercise (an option)
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Visual Representation of a Stock
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Visually, a good stock investment looks like this:
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5/18/2012
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-
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20
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40
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60
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80
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100
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120
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140
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160
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180
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200
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5/20/2013 249 499
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Date/Day Count
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Stock Price
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749 999
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Future Stock Price
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Last Stock Price
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Y ou can make a lot of mistakes when investing, but as long as you are right
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about the ultimate direction a stock will take and act accordingly, all those
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mistakes will be dwarfed by the success of your position.
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Good investing, then, is essentially a process of recognizing and
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exploiting the directionality of mispriced stocks. Usually, investors get
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exposure to a stock’s directionality by buying, or going long, that stock. This
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is what the investor’s risk and reward profile looks like when he or she buys
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the stock: |