A little class for you regardless who don’t know what this pimp life is about

A little help on what options are for you regards

I have been reading comments in here and I can’t believe you little dipgards can’t even have one aota of brain to think. Despite that I am here to save you and explain what it is you are exactly buying when you buy options…

Joe thinks $CHEESE will go up above 5$ soon. Joe however doesn’t want to buy a lot of $CHEESE stock because his money is tied up in $DICK, however he would be willing to buy $CHEESE later if it does go up.

Joe goes to his friend Jack who owns 100 $CHEESEs and tells him… “hey Jack I will give you 60$ as long as you sell me your $CHEESEs for only 5$ even if it goes above that price up until next Friday.

Joe paid Jack a premium of 60$ or .60 for a call on $CHEESE with a strike price of 5$ expiring next Friday.
BASICALLY Joe is Long Call on $CHEESE.

Now from Jacks POV:
Jack has been jacking off like a regard to his $CHEESE which he bought at 2$. Jack thinks…

“hmm I don’t think $CHEESE will go to 5$ anytime soon, but if it did, 5$ sounds like a good price to pull out and sell it for green money to pay my wife’s boyfriend his rent.

So now Joe comes along and offers Jack this opportunity to make some extra cash (premium) as long as he keeps his promise to sell it to Joe at 5$ (strike) even if it goes way above that…

The second Joe went long and offered him the premium, the call contract was created… Joe went long call… and Jack went short call.

As the exp date comes closer, there is less chance for $CHEESE to moon, so the contract is less worth. This is called Theta 😨! It is good for Jack and bad for Joe. Joe can now hand off the contract to someone else and sell for less (what some of us do here in WSB) or hold til it expires (what most of us do here in WSB).

Now a contract covers 100 $CHEESE shares. So if $CHEESE goes to 6$ on expiration date. Joe could basically buy 100 $CHEESE from Jack for 5$ and sell it on the market for 6$. That is a profit of 1$ per share or 100$ total. Because anyone who holds this call could buy from Jack at 5$ and sell for 6$. This option is priced accordingly, meaning the option is worth 100$… this is called intrinsic value! wow 🤩.
If Joe can’t afford to buy 100 shares x5$ each for 500$ to sell for 600$. Joe can simply just sell the contract back to someone who can afford it. Because the option was priced accordingly to its intrinsic value, Joe makes the same amount of money as he would’ve if he had 100 shares, but the option only cost him 60$. He made the same amount of profit with less investment, this is called 🌈leverage✨🥳 and we love it here!

Thank you so much for listening to this! 🤤 im so happy you got to sit through story time and maybe learned about something! Let me know if you want a lesson on puts tomorrow! ✨

TLDR: Jack is short call Joe is long call. Whole lotta $CHEESE and $DICK.

Positions: very berry long $LUNR and a forbidden small cap 2025calls. Will buy OXY

Source: I’m a 💫 special special💫 smart student 🧑‍🎓