Track 'n Trade Futures End of Day
Buy a Call Option
In this Track 'n Trade Pro Trading Tools Tips example, I want to highlight for you the Call and Put Button, Order Options Tools.
Now, the way we do that, is to...if we want to place a Call Option, of course you have to have the Options Plug-In to Track 'n Trade Pro. But let's take a look at this market- and let's think that we believe that this market is going to go back up, and we want to make a Call Option.
Now, a Call Option gives us the right, not the obligation to Buy the underlying Futures contract at the specified price. Again, the right, but not the obligation.
So, let's come in here, and click on a Call Button, drag it up and down on the screen. Notice it jumps between the strike prices. Of course, again, you have to have the Options Plug-In to do this. Buy a Call Option, a 220.00 Call Option, at $206.25.
We can use our little Rubber Band Tool to draw this back and forth along with the areas of support and resistance. But we like the 220.00 Call at $200.00. So, we release the mouse button. It comes up with our Options Order Dialogue Box, and it tells us our commodity. We're Corn: 2001, December. The date that we want to place the order for: we want to Buy 1, 220.00 Strike Call. Then, we come down here, and it's on screen, this is what we want to see, all these nice.....this information.
We see the Premium is 4.1250. The Value is $206.00, the Brokerage fee is $20.00. That would be a $40.00 round turn, 20 in 20 out. If your Broker allows you to do it that way. Many brokers make you do both in and out on the Entry Point. So, let's put that at 40.00. So, that would be our $40.00 In and Out.
Then, we hit Okay. Now, it says, there's Insufficient Funds In Your Account. That means that we have not opened our Account, yet, in Track 'n Trade Pro. Of course, we're a simulator and we need to have money in our Accounts.
So, we need to place an order, so we need to open our accounts, we say Yes. Now, of course, we could have done this prior to placing the order by going over here to the My Account Status and just clicking the Deposit Button. But if you forget or you don't have enough money in your account, it will ask you to create an account, a fictitious simulated account. Before you go into placing your order.
So, let's say we're in a Time Machine, we're going to come back to June 1st, and say that we're going to open our account with $5,000.00. We hit Okay. Now, we have executed our order to Buy 1, Call at 413.00 at a Value of 206.25.
The following Warning, when we step this market forward. Our order is executed and we have simulated purchasing 1 Call. The price that we got it for was $206.25. You see that over here in the Dollar Calculator, on the left hand side. You see it on our spreadsheet, that we have a Closed Options Profit and Loss. That means we paid $206.25 for that Option. It's current Value is $218.75. So, it went up in value on the very first day we bought it.
We paid a $20.00 commission. That gives us a Loss of $7.50. So, as this market moves forward, or against us. We either lose or increase or decrease in value.
Now, notice that the market actually went down, but our Option increased in value. Isn't that interesting? Step that forward, again, now the market actually closed higher this time. Which made our Option increase even more in value. So, we're now up $105.00. Then, as that market increases in value, you can see that we're making all kinds of money with our Option. We're now up $1,305.00.
Now, let's say we want to liquidate our Call Option. We want to take our Profits. What we do, I'm going to for simplicity sake, I'm going to right click, on this tool. I'm going to tell it to not show us the text. I'm going to come in here, and I'm going to click the Call Button, because we bought a Call. We need to now liquidate our Call, or Sell a Call.
So, come in here, and click on the Call, we drag it to the exact same Strike Price, as where we bought it. The 220.00, okay? Now, if we Sold a Call, here, we would be doing a 230.00 Call, which is a different Call, altogether. If we're going to try to liquidate this 220.00 Call, we've got to place this new order, right exactly on the same Call area. So, we set it on the 220.00 Call, release our mouse button.
This time instead of Buying the Call, we want to Sell the Call. So, we Sell 1, 220.00 Call, say Okay. The following day we're going to step the market forward, we liquidate our Call. We get the very best price possible. Then, we are able to liquidate our Call Option for $1,305.00 profit.
That's how we Buy and Sell, or Buy and Liquidate a Call Option in Track 'n Trade Pro.