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Investing in big cap companies such as Apple or Google can be profitable, but with stock prices dosing in on $1000 a share it can be out of reach for many investors. There is a way to benefit from the movement of the stock without ever owning a single share. Buying call options will allow you to profit from a stock’s rise while at the same time allow you to invest less than you would if you were to buy the stock outright. A stock option is a contract. When you buy a call option you have the right to buy the underlying stock at a set price (the strike price), on or before an expiration date, regardless of the value of the underlying stock. Each contract is worth 100 shares. So if you have 10 contracts of Apple at a strike price of $600 a share, you have the right to buy 1000 shares of Apple at $600 per share, even if the current trading price of Apple is more than $600. This is called exercising your option. If the stock is trading at $615.20 per share you might be able to buy a call contract with a strike price of $650 for a premium of $608. Remember that a contract is 100 shares so the total premium for one contract would be $608. Now you are controlling the same amount of stock for a fraction of the cost. This contract would give you the option to buy 100 shares of Apple stock for $650 a share regardless of the trading price of the stock. As of right now the option is considered to be “out of the money”. visit: Stock Market Recommendations
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