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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Tip of the day.

Buy the Jan. 2015 Bank of America, Call Option.

It wil cost you about $1.70 per share at the strike price of $15.

Buy 10,000 = $17,000

Present Real Time Price 14.64.

You would be buy the rights to purchase 10,000 Shares of BAC at $15 in roughly 510 days from today. In order for you to break even the share price during the next 510 day must rise to $16.70. Beyond that price would be making a profit. Any price below $16.70 and you'd be taking a loss.

For every dollar it sells for over $16.70 in January 2015 you'll be making a profit of $10,000. If BAC ran up to $26.70 (and it will) during the next 510 days your profit will be $100,000 minus the $17,000 you paid today for the Call Option for a net profit of $83,000. [/quote]

Could you elaborate?  I'm really curious if this is reliable.[/quote

There is not much more to say. If you have a brokerage account you can purchase shares in corporations e.g. Bank of America  (BAC) closed at  $14.65 today. To purchase 10,000 shares of BAC at the current price it will cost $140,650. That's quite a bit of cash or a large loan if you were to purchase them on margin. If you believe as I do that the economy is in recovery mode and when national economies expand the banking industry profits then you might ascribe to the notion that BAC which is only selling presently for 65% of its book value will grow in price over the next several years. Notable bank analyst Dick Bove believes BAC will double in price during the next two years to somewhere in the $28 per share range.

So, if you go to your investment broker's website and get a quote on BAC you'll find it closed at $14.65 and there will be a prompt asking you if you wish to make a trade. When you purchase shares you own them forever or until you sell them. When the market crashed in 2008-2008 the value of people's portfolios crashed as well, but for those who did not sell their shares, for the most part their shares have now returned to profitability. However there are exceptions like Citibank and G.E.  the point is if you own shares you have the potential to weather the storm during down markets.

What I am suggesting is potentially more risky, but the upside is almost exponentially greater. Rather than purchasing 10,000 shares of BAC for $140,650, you would be purchasing a contract for $17,000 that guarantees you the right to purchase 10,000 shares in Jan. 2015, for $15 per share. You have to decide for yourself, but I believe on that date shares of BAC will be selling for at least $26.70.

My option contract guarantees me the right to purchase those 10,000 shares at the price of $15. I then purchase 10,000 shares times the options price of $15 equals $150,000. However, if my presumption of BAC share price appreciation to $26.70 is correct, times 10,000 shares the value of my purchase will be $267,000. Immediately after purchasing my 10,000 shares at $150,000, I will sell them at market price (Jan. 2015) for $267,000.  Now I'll have, $267,000, but I have to strip away my costs of doing business which are as follows:  the $17,000 spent to purchase the options contract is gone. I had use or borrow $150,000 to purchase the shares so that's not profit either. So now I've had to strip out $167,000 dollars from the $267,000 in proceeds from the sale leaving me with a $100,000 profit.

I like to use the number of 10,000 shares because it is easy to translate that any gain of $1 in share price translates into a $10,000 profit for me. Depending on the options you purchase they can expire as early as tomorrow or years into the future. In the scenario I've described the break even point is $16.70 in Jan. 2015.  Anything below $15 and the trade will expire without being executed resulting in the total loss of the $17,000 spent to purchase the contract. However, the beauty of this kind of an options contract is the most you can possibly lose is your initial purchase price which in this scenario is $17,000, but the upside potential gain is only limited by the window of opportunity which in this case is more than five hundred days into the future.

I just happen to like the banks right now. Options such as this can be purchased on just about any corporation listed on the stock exchanges. Just to reiterate. To use $17,000 to purchase BAC shares you could purchase roughly 1,250 and if the price runs up $10 during the next five hundred days your profit will be $12,500. However, if you used $17,000 to purchase options contracts under the same scenerio your profit will $100,000 minus the cost of the options.

It seems a lot more complicated than it really is. You can do this!!!  Be a proud and unabashed capitalist!!![/quote]

Doing research on option calls and covered calls. I know this is an old thread, but following along the BoA contract, it seems like January 2015 did not meet the $16.70 price. How did this end up turning out? [/quote]

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