Can someone give me a plain English description of Options? I think I get enough to think about doing what I want to do, but I'm not 100%
Example - I'm thinking biotech in the US will likely bounce post elections. So I'm thinking about buying Calls on, say, Gilead GILD for Jan 2017 for the option to buy (strike price?) at $85 or something. I'm guessing they will go up a good chunk by then. If not, so sad, so bad.
Now, the premium seems high (one version was about $485 for a single contract, and if the stock went to $100 I'd get ~$2000). Is this a bad deal?
If I bought inside a registered account and wanted to exercise the option, do I actually have to have enough cash to *buy* or can I somehow convert the option straight to cash - so say I bought a $90 option and it went to $100, do I need the $9k to realise the $10k, or is there a passthrough?
Suggestions for a good read on this stuff?
*Edit* Hmm, just had a read of the Questrade novice's guide. Seems full of jargon but otherwise straightforward. Selling covered calls on stock you're somewhat ambivalent on, or want to get income from in the case of decline even while holding as part of your overall asset allocation, seems to make some sense.
Need to think further about it, but say - for example - you're 20% invested in emerging markets, you could sell some covered calls on some fraction that you might have to rebalance if it goes up/generate income to purchase more when rebalancing if it goes down...
Hmmmm.