Nickel Options

Nickel options are options trading for $0.05. They offer a high reward to risk ratio. At five cents per share, a contract of options for 100 shares costs $5. Nickel options are available on call options and put options where the strike price is significantly different from the current market value. Instead of risking a lot of capital in one stock, an investor can make a small bet on a nickel option and make a similar profit (see Options Profit Analyzer). For example, if a stock is trading at $29 currently, the call option to buy the stock at $35 expiring the upcoming month can be available for $0.05 per share. The market has valued the call at a minimal price because most people in the market believe the stock will not reach the strike price in the amount of time given. However, if an investors believes the stock will reach $36 within one month, he can buy six contracts for the 35 call for $30 ($0.05/share *100 * 6). If the stock does reach $36 before the expiration date, his initial $30 investment will become $600 ($1/share*100*6). Let's say this investor only $1000 dollars to invest. Initially he would have only been able to buy about 33 shares in the company, and his profit from 29 to 36 would have been $221. Instead of risking his entire investment account into one stock, he was able to make a larger profit with less money. The other outcome could have been losing all of his option investment if the stock failed to reach $36 or went below $29. In this instance, he would have lost $60. In this investment scenario, the risk benefit ratio allowed him to multiply his money tenfold. Nickel options and options in general do have the ability to completely eradicate your initial investment, big or small, but their rewards can be extraordinary.