Do lower price stocks roll faster?
Yes, lower priced stocks tend to roll faster. Why buy options on rolling stocks Options provide you with more leverage. If a stock trades at $40, it would take $20,000 to buy 500 shares. Using options, you can buy ten 40 call contracts at $7. Now, for just $7,000 (10 contracts x $7 x 100 shares per contract), the investor owns the rights to buy 1,000 shares of stock at $40, any time before the call options expire. If the stock price is $60 at expiration, the options will be worth $20 each ($60 – $40) or $20,000 (10 contracts x $20 x 100). The investor will have a profit of $13,000 on a $7,000 investment. In contrast, the investor who paid $40 for 500 shares spent $20,000 to make $10,000 ($60 – $40 x 500 shares). That’s the power of leverage. However, the risks are equally high. If the stock doesn’t move, the investor who paid $7,000 for the $40 calls will lose the entire investment. Likewise, the investors who bought the stock will have lost nothing because they still own the stock. As
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