Options part 3
Some of the others might think well, I do short stock.
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- Rick Thachuk March 31, PM Rick has been involved in various aspects of the futures and options markets, including positions as an economist and derivatives market analyst at the Bank of Canada and Finex.
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So maybe I would consider this. Your risk to the downside is similar to that, but the profit potential is not similar to shorting stock. That equals to hundred dollars of actual cash that changes hands when selling this option.
How to trade Options Part 3
The most you can make when you sell an option is what you sold it for. And this is a naked call.
No other position, you have no other options position, no stock position at all. This is just the outright position of naked calls.
And then when you add different pieces to it, you change the risk profile dramatically.
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Maximum risk is substantial. On the previous example the risk was similar to shorting stock.
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Now, when it comes to reaching expiration and holding positions, one thing I want to point out upfront is most options are not held until expiration. There is a myth that exists that most options expire worthless.
In that case the option profit or loss really cannot be options part 3. All the industry knows is that the trade is closed.