RE:RE:RE:Many people are shorting marijuana stocks Cathat6of9 wrote: Jailhouse. Are you talking about covered calls or the other type. The calls I buy can reward upside moves much more than shares. If it collapse I loose a lot more than a small premium, my call value can go to zero and I lose it all.
JailhouseTattoo wrote: The same is true of calls , they can reward the huge upside moves almost the same as shars , a small premium loss against pure stock move but if it collapses on you you might lose a small premium and that is it in comparison to possible 30 dollar drop in a doomsday sell off. .
If you buy a call at the money its value is the premium, say 3 dollars for eg, if there is a major upside move as you pointed out can yield just as much per share for a lot less in . Your loss even at zero is only 3 per unit , if you buy the same shares you get the full gain without losing the premium spread on a big up move or even a modest one but a zero with calls is the worst case and only amounts to 3 per unit but owning the shares takes a lot more capital and comes with the risk of losing way more than 3 per unit , on a collapse you could lose say 20 per unit. My point is when things are this volitle even the juicy premiums on puts and calls make sense to the risk averse, gamble small and sell on a homerun if the coin flip favours your play.