Hello to anyone who’s reading this!
I’m new to options trading. I’ve been doing covered calls for about 3 months.
I’d like to learn how to do Long Call Options on the Schwab platform.
I chose KHC. 35.44 a share.
So far my understanding is I have to “Buy to Open”.
1 contract.
I set the strike price OTM with an expiration over a month out.
So — Buy to Open 1 KHC exp 11/1 strike 39$
Ask is 222$
So I buy for 222$? Then what? Do I wait a month, let it expire? How do I make money doing this? Do I Sell to Close before 11/1 within the same option?
https://i.redd.it/lfo21p870mrd1.jpeg
Posted by AstroAtheist420OG
8 Comments
1. Do not buy this option. Look at that spread!
2. When buying try to get as close to mid as you can.
3. Dont let it expire just sell when youre happy with the profits.
4. Options are literally a contract, you will be on the other side of the trade youre normally on. It will be the opposite of the CCs youre used to.
All your actual questions aside: WHY ARE YOU USING THIS AWFUL ORDERING SYSTEM!? Schwab has thinkorswim now, use that! This is awful, slow and clunky!
Literally you will throw away 222 bucks if you buy that contract
Get authorized for Tos, make sure you tell them you want to do orders on Tos, they are dense so you have to tell them that.
Also you why are you using 11/1 that is not a monthly and you will not get the best spreads, but you will become a fan favorite on Reddit.
Buying Options, only lost money doing that. Maybe figure out Verticals which are defined risk, and you could learn something.
Try this.
https://www.tastylive.com/concepts-strategies/10-options-strategies-every-trader-should-know
Buying calls can be a good way to leverage your capital. Sounds like you have the buy to open part down. If you exercise the contract, you would buy 100 shares of KHC at $39 a share, even if the share price is $50. If the share price is below the strike price at the time of expiry, your option would expire worthless and you would be out the $222 (plus commission fees). You can also sell the contract before it expires, ideally for a profit. Check out [Investopedia](https://www.investopedia.com/options-basics-tutorial-4583012) for a good rundown on options.
The last person who offered to buy that contract offered $10, and you’re going to offer $222? Why would you do that? You would be guaranteed to lose the $222 so just don’t. Quit worrying about how to work the trade screen and worry about learning how options work.
Are you looking at this after market close? You want the spread to be tight for liquidity reasons like .05-.10 difference between bid and ask.
Edit: .05 not .5
Get off the website and get signed up for think or swim if you are with Schwab. There is a learning curve, but you will thank me after you do it.