One of Johnny Carson’s best characters was Carnac the Magnificent. Clad in a cape and giant feathered turban, the comic great pretended to prophesy the answers to secret questions. The act went something like this: Carson holds an envelope to his head, pretends to concentrate, and then sternly says, “Sis boom bah.” Then he opens the envelope and reads the question that prompted the answer: “What sound does a sheep make when it explodes?” If only it were this hilarious and easy to predict the future values of investments. That’s why people use options. Predict the future price of a… Read More
One of Johnny Carson’s best characters was Carnac the Magnificent. Clad in a cape and giant feathered turban, the comic great pretended to prophesy the answers to secret questions. The act went something like this: Carson holds an envelope to his head, pretends to concentrate, and then sternly says, “Sis boom bah.” Then he opens the envelope and reads the question that prompted the answer: “What sound does a sheep make when it explodes?” If only it were this hilarious and easy to predict the future values of investments. That’s why people use options. Predict the future price of a security accurately, and you’ll make far more money than just holding the security. Blow it, and you can at least limit your downside. It sounds easy, but before you put on your own feathered turban, here are a few things you need to know about options. 1. What Are Call Options And Puts — And How Do They Work? The most popular forms of options are puts and calls. A call gives the holder the right, but not the obligation, to purchase 100 shares of a particular underlying security (usually a stock) from the seller at a specified strike… Read More