Originally Posted by
dalad
Ok, any math geniuses out there? I bought 30 contracts with a 13 strike price of LCC in my DC plan for an average price of $1.53. That's like me holding 3000 shares of LCC at $14.53. In AH it went up to 14.90 but the market cap is going to go up by $700 Million by AM, I hope based on 162.47 million shares and a market cap of $2.38 billion. LCC's share is $3.080 billion. I think the opening price will be close to $19 per share?
Have you ever bought/sold options before? It's NOT like you are holding 3,000 shares at 14.53. You simply have the OPTION to purchase 3,000 shares at 13. IF you exercised the option, you would then have to pony up $39,000. Of course if the price then hits $19, the account value would then be $57,000. If sold at $19, the profit would be $13,410.
Right now, you just own the options. You paid $4,590. As the Feb options close Friday, an underlying stock price of $19 would show your 13 strike with a price of around $6. If you simply closed the position (automatically closes at the end of Friday), the proceeds would be approximately $18K for a profit of $13,410.
One big difference is the tax implications. You pay short term gains on closing the contract. If exercised (you buy the underlying stock at $13), there are no tax implications until you then sell the shares.