paddington's - watching the generals - friday, page-51

isplicer - regarding options: the sept12 4800 call option valued at 49c allow u to take a position to profit if the market moves towards 4800 (XJO). The option has a valuation depending on what the XJO is at (currently 4300 say) and this valuation will rise or fall as the XJO rises or falls.
This valuation will also fall as the option moves towards its expiry date (sept12 usually 24th of the month). If the XJO is under 4800 as sept gets closer, the value of the option will fall towards zero (0c). If XJO is at or above 4800 or rises towards 4800 during now to sept then the value of the option will increase. Price usually goes up about 1c per 10pts on the XJO (ballpark figure). So say XJO goes up 100 pts in cpla days, the option will rise approx 10c to 59c = 20% gain in price. If he XJO falls 100 points then the option goes down 10c. The options are usually traded (puts and calls) to protect an existing portfolio from loss (in the case of puts) or to gain income on existing holdings (covered calls) or just to gain an income from trading the option.
Now if you understood all of that, u might have a chance. If you dont understand any of the above then I would suggest not touching options until you read and understand some books on trading options (at least 3 - any 3 to start). it would be a shame to have another HC member lose money unnecessarily on a financial instrument he/she doesnt understand.
Cheers.