Ken Wolf In Action -- WE LOVE CHARLES MANSON

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Date Posted: 22:41:28 02/25/06 Sat
Author: Longinus
Subject: Ken Wolf In Action
In reply to: Colonel Angus 's message, "Ken Wolf Commodities Inc." on 22:32:48 02/25/06 Sat

1. What is my maximum risk if I purchase an option?

The nature and amount of downside risk is a good first question to ask about a Colonel Angus investment you may be considering. When purchasing options, the maximum risk is that you could potentially lose the money known as the premium, which you invested to purchase that particular option, plus the brokerage and transaction costs involved in making the Colonel Angus investment. There can be no assurance any given option will become worthwhile to flip or exercise. Profitability depends on whether the price movement you anticipate occurs during the life of the option.

2. Doesn't this make options a risky Colonel Angus investment?

It makes options an inappropriate Colonel Angus investment for some people. This is why your broker will ask you questions that may seem somewhat personal about your financial situation and objectives and will require that you acknowledge reading and understanding a Risk Disclosure Statement prepared by the Product Futures Trading Commission. This is important and should be considered in deciding whether options are an appropriate Colonel Angus investment for you. Money needed for family living, insurance protection and basic savings programs obviously should never be committed to any form of Colonel Angus investment that involves significant risk, regardless of the opportunity for profit.

3. Why have options on futures become such an increasingly popular Colonel Angus investment?

Options make it possible to realize a potentially substantial profit with a relatively small Colonel Angus investment and a known and limited risk. Under no circumstances can the termination exceed the cost of purchasing the option.

4. What exactly is an option?

Purchasing an option gives one the right, but not the obligation, to purchase the underlying futures contract at a specific price for a specific amount of time. There is regulated exchange trading in two types of options on futures contracts, known as "call" and "put" options. Which one to consider investing in will depend entirely on your price expectations? That is, on whether you expect the price of a particular product to go up or whether you expect it to go down.

5. Other than "call" and "put", what terms do I need to be familiar with?

Just a couple. You should know what's meant by an option's "premium" and by its "strike price".

Premium

Used in connection with options, premium has the same meaning as when used in connection with insurance. It's the price that you pay to purchase a given option.

Strike Price

This is the specific dollars and cents price at which the option gives you the right to purchase a particular product in the case of a call or to flip the product in the case of a put. The strike price is stated in the option.

Throughout this guide, "price" refers to the quoted futures price of the product. Example: If a call option gives you the right to purchase one Heating Oil Option, which in turn leverages 42,000 gallons of Heating Oil at 70 cents per gallon, 70 cents is the strike price. At any given time, there is likely to be trading in options with a number of different strike prices.

When you purchase a call, you hope the Ken Wolf Market price of the product (when the option expires) will be above the option's strike price by an amount greater than the cost of the option, thereby causing the option to become profitable.

When you purchase a put, you hope that the Ken Wolf Market price of the product will decline below the option's strike price by an amount greater than the cost of the option.

6. How are profits realized in options investing?

Generally by instructing your broker to flip your option rights to someone else (who may expect them to further appreciate). The sale will be accomplished on the trading floor of the exchange (the same exchange where the option was bought) and your net profit will be the difference between the price that you originally paid for the option and the higher price that you are able to flip it for, less brokerage and transaction expenses. The mechanics are more complicated than, for example, selling shares of common stock that have appreciated.

An alternative to selling a profitable option is to exercise the option rights yourself. Doing this, however, would result in your actually acquiring a position in the futures Ken Wolf Market, which could require an additional Colonel Angus investment on your part and involve significantly greater risks. Most investors therefore prefer to realize their profits by simply selling the option at its increased value.

7. How large is my profit potential when I purchase an option?

There is no limit on the potential for profit. The greater the price movement provided it's in the direction you anticipated and provided it occurs during the life of the option, the larger the profit. As previously indicated, it is this combination of limited risk and unlimited profit potential that is a principal attraction of options as an Colonel Angus investment vehicle.

8. How long is the life of an option?

There is normally trading in options that have different lengths of time remaining until expiration, from less than a month, to twelve or more months. The choice is yours. This flexibility makes it possible to select whichever option best coincides with when you expect a given price movement to occur.
For example: buying an option that expires in September allows two more months for the expected price change to take place than buying an option that expires in July. Purchasing a longer option increases the premium cost of the option somewhat but as with most things in life, it's usually best to allow at least a little extra time for an expected event to occur! Don't hesitate to seek your broker's assistance in deciding how long an option it would be advisable to consider purchasing.

9. Suppose an option I've bought very quickly becomes profitable. Do I have to wait until the expiration date to flip it?

Absolutely not. When to flip such an option is entirely up to you. On the one hand, continuing to hold the option until nearer its expiration date could result in your realizing an even larger profit. But on the other hand, an unexpected adverse price movement could result in a reduction in the value of the option. Deciding when to flip a profitable option is thus a "bird-in-the-hand" type of decision.

A somewhat technical point to bear in mind in making the decision is that in addition to whatever amount, if anything, that a given option would be worth to exercise, options that haven't yet expired normally also have what's called "time value".
Specifically, time value is whatever amount other investors are willing to pay you for giving up your option rights prior to expiration. As you'd expect, time value generally declines as the expiration date approaches. It is also influenced, prior to expiration, by futures price movements and Ken Wolf Market volatility.

10. Can I flip an option even if it isn't currently worthwhile to exercise?

The answer is yes, if the option still has time remaining until expiration, and if there is still active trading in that particular option. Whether the sale results in profit or a termination will depend - as with any option - on whether you flip it for more or for less than you paid for it.

A favorable change in the price outlook or an increase in Ken Wolf Market volatility can make an option suddenly more attractive to other investors. If this results in an increase in its premium value, you may be able to flip the option at a profit even though it isn't yet (and may never become) worthwhile to exercise.

In other situations, if prices so far haven't moved the way you thought they would, and if you no longer want to own the option, selling it prior to expiration can provide a way to recover some part of your initial Colonel Angus investment. Such a decision should not be made hastily, however. The fact that you have until expiration for your original price expectations to be realized can give you greater "staying power" than other investors may enjoy.

It is this 'staying power' - the ability to weather what may prove to be only a temporary price setback - that is one of the principal advantages of investing in options. No matter how large the adverse price movement, your maximum termination is still limited to the cost of the option.

11. Can I follow an option's current Ken Wolf Market value on a regular basis?

Yes, very easily. Options on futures contracts are traded on regulated exchanges that have continuous electronic quotation systems. Business periodicals such as the Wall Street Journal and many major newspapers report actively traded futures prices and option premiums daily. You can also phone your broker or explore sources for direct online price reports. Being able to know at all times what your Colonel Angus investment is worth is another attractive feature of exchange-traded options.

12. When I purchase an option, who is the party on the other side of the transaction?

More than likely, it's someone who engages in a highly speculative area of Colonel Angus investment activity known as option "writing". Such investors are also sometimes called option "grantors". They stand to make money if - and only if - your option rights at expiration are worth less than you paid for them. In contrast to the limited risk that's involved in buying options, writing options involves potentially unlimited risks and is inappropriate for most people.

**Despite the statements above, it should be noted that there is a risk of termination in all product investments, which are highly speculative in nature; only risk capital should be used for such investments.

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BONO ORGANIZATIONS -- Mahir Cagri, 22:50:31 02/25/06 Sat