Need help getting started on options

RV726
02-04

I am new to options and trying to understand the concepts and also how options work on tiger brokers as mine is a small account.


I heard tiger brokers settles stock options in stocks and index options in cash. I just want to understand how things work.


Say, I put up a trade with following legs:

BUY 1x 395.00 CALL (premium = $ 26.43)

SELL 2x 385.00 CALL (premium = $ 30.50)

BUY 1x 375.00 CALL (premium = $36.00)


At the outset, this will be a - $ 143 (-2643+3050+3050-3600). This is a small amount. My small account can afford this. 

Q1: Is only 143 taken from the account or is it only settled at expiry or when trade is closed.

Q2: Any other margin requirements to put the trade on?


If at expiry, the price is $ 370 (below all the strikes), then all calls are worthless and you loose $ 143.


If at expiry, the price is $ 400 (above all the strikes), then:

> To realize profit on the 395.00 BUY CALL: I must buy at 395.00 and sell at 400.00 - this means I need $ 39,500 in my account

> The 2x 385.00 SELL CALL is a losing trade: The buyer will exercise and I have to BUY at 400 and sell at 385 to realize the loss - I need $ 80,000 in my account for this.

> To realize profit on the 375.00 BUY CALL: I must buy at 375.00 and sell at 400.00 - this means I need $ 37,500 in my account.

To close this trade (settlement in stocks) - I need 39,500 + 80,000 + 37,500 - $ 157,000 in my account.


This type of settlement put most options trade out of my reach.


Is INDEX OPTIONS a better way for small account?


# Have You Ever Tried Demo Account?

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  • DarkRaven
    ·02-04
    TOP
    Sell put only when you are confident buying their shares at the strike price. Once u get assigned, go ahead sell covered calls above the assigned shares at strike price. If u didnt get the assigned at strike price during sell put as market go into uptrend, u earn the premium. Please do more research or try out demo before u trade.


    Good luck to your trading.
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    • RV726: 
      Thanks for the input. The sell put scenario was well explained by you. I tried demo trading options. Mostly getting this notification "The Prime Account does not currently support this trade on Tiger Trade Desktop". I am not a fan of trading options on mobile app. There is too much info to scroll left and right.
      02-04
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    • RV726: 
      I replied earlier, but seems to have disappeared. Thanks for the input. I think the sell put suggestion is a good one. If you get assigned, you still need a big account to buy 100 shares.
      02-04
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  • LMSunshine
    ·02-04
    Be careful and don’t be 🔥 Suggest you using the demo account to trade and be very sure of how you’re using options. You’re doing somethinh rather complicated given that you’re new to options😅 Have a blessed year ahead🌈
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  • Tiger_CashBoostAccount
    ·02-05
    Great job on your latest stock market success! Your commitment to research and analysis is evident in your results.Trade with Tiger Cash Boost Account and use contra trading toenhance your strategies."Welcome to open a CBAtoday and enjoy access to a trading limit of up to SGD 20,000with upcoming 0-commission, unlimited trading on SG, HKand US stocks. as well as ETFs.
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  • o4hc
    ·02-04
    You know most people lose money on these, right? Don’t believe the influencers!
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