My First Experiment With Options

As i mention a few posts ago that i would be using the Stock Simulator to get the hang of how they work.  So far the only thing i have learned that i was confused about was the pricing of an individual option contract.  The purchase price is the value of the single optioned share but each contract consist of 100 shares.  But after that much i am still confused, such as to the difference between a put and a call option.  Also the significance of the the date on the option and its relation to the value on the option in comparison to the value of the stock. 

Even though i had no clue i picked a put option on APPLE inc at $385 for 03/19 at 28.05 for a total of 3 contracts.  At the end of the trading day today i logged in to check how the portfolio was doing.  All my stock picks had a down day but the option's trade had a massive jump moving up to a 26.02% gain after 2 days.



On the other hand my real Portfolio fared much better of the course of the week.  I am starting to see the benefit of diversifying my portfolio over different sectors versus having it all in a single stock.  My gains/losses during the day are more stabilized.  With each of the trading days in a mild up swing.  Here is a screen capture from Google Finance for my portfolio, note that the gains on Vodafone Group Plc ticker VOD is since Jun 10th and gains on individual stocks has the broker fees factored in all ready.

I initial choose VOD as speculation on Verizon Wireless receiving the Iphone this is due to Vodafone owning 45% of the Verizon Wireless business.  Also the value of the stock was very good and the Dividend payments were over 5% at the time, also the security of its international exposure and the free cash flow of the company.  Chimera Investment ticker CIM is a stock that i was considering around the same time as i was Vodafone, it is a REIT Real Estate Investment Trust with a extremely large dividend which scared me away from it at first but it is a subsidiary of Annaly Capital Management NLY which is one of the best in the business so it quelled my fears.  The price has been fairly steady and the dividend of almost 16% and my strategy with this is as a steady earner over time based on the dividend alone and not on capital gains, but I'm ok with some as well.  Alcoa Inc. AA is of the largest Aluminum Manufacturers in the world, which had taken a beating last year and the Projected earnings for this year is expected to quadruple over last year.  Also Alcoa overs a low quarterly dividend which i am expecting it to be brought back up to levels of previous years this year making it very profitable yield, but my aim is at capital gains due to the company getting its business in order.