Quote:
Originally posted by lil2rich4u2
to cover losses on a stock your not too sure about? But why buy the stock if you are so unsure?
just asking
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Nah I am refering to say very weathly individuals that have huge positions from companys they have. Options are good tools to hedge away those risks. Infact, many very weatlhy individuals will collar positions to take loans out on principal.
As for your question, the 315 is lost., it is the premium you paid for the contract. Always remember, the amount you pay is not for the stock itself, it is for the premium for the stock at the strike price. The premium will get less and less with all things equal closer to the strike date. One of the premiums factors is time.
So, to break even you always have to have the premium + strike price = current instrument (in this case stock) price.