The Ultimate Guide to The World of Options Trading by Manny Backus

Author:Manny Backus [Backus, Manny]
Language: eng
Format: mobi
Publisher: Wealthpire, Inc.
Published: 2013-08-22T16:00:00+00:00

To cover your position of 10,000 shares, you’d need to purchase 100 contracts.

To minimize your losses, you could buy 100 contracts of TMF.X, locking in a share price of $30. At the current ask of $2.35, this would cost you $23,500. That’s a pretty good chunk of change! However, you might have an easy time getting a loan to cover the expense, so long as you pledge your inheritance as collateral.

If you pursue this strategy, the worst that could happen would be AT&T falling under $30 per share, and once you received your inheritance, you could sell your 10,000 shares at $30 (no matter how far they’ve dropped). You’d thus receive $300,000, but you’d have spent $23,500 (plus interest if you borrowed the money). Still, at least you’d be able to sleep every night from now until January 1 knowing that this would be the worst-case scenario!

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