CRM put option
$275 call 437x return
From 8/24/2020 – 8/26/2020*
CRM call option
$280 call 99.7% loss
From 8/31/2020 – 9/4/2020*
Here is a closer look into how one CRM contract turned $500 $218,500 in 2 DAYS, while another CRM contract turned $500 into $1.50.
Salesforce, Inc (CRM) Option Contract
437x return in 2 DAYS
From 8/24/2020 – 8/26/2020*
Contract Details:
• Underlying Stock: CRM
• Call or Put: Call
• Expiration Date: August 28, 2020
• Strike Price: $275
How This Positive Return Occurred
CRM’s underlying stock price increased from roughly $209 to over $275 between 8/24/2020 – 8/26/2020.
When investing in a Call Contract, you believe that the underlying stock price will reach the strike price of the contact. In this case, CRM’s stock price increased above the $275 strike price on 8/26/2021, resulting in the contract being worth a lot more than when initially purchased.
On August 24, 2020, CRM’s Call Contract at the $275 strike price last sold for 1 cent (.01). See below for details.
|
Last |
Mark |
Bid |
Ask |
Exp |
Strike |
| G 20 (4) 100 (Weeklys) | |||||
|
.01 |
.480 |
.01 |
.95 |
28 Aug 20 |
275 |
On August 26, 2020 CRM’s Call Contact at the $275 strike price last sold for $4.37. The contract’s price increased because CRM’s underlying stock price increased above the $275 strike price on this day.
|
Last |
Mark |
Bid |
Ask |
Exp |
Strike |
| 100 (Weeklys) | |||||
|
4.37 |
4.300 |
4.20 |
4.40 |
28 Aug 20 |
275 |
To paint you a picture, if you invested $500 on this Call Contract on 8/24/2020, your return could’ve been $218,500 on 8/26/2020.
The Math:
4.37/.01 = 437x return
$500 x 437 = $218,500
Salesforce, Inc (CRM) Option Contract
99.7% loss in 2 DAYS
From 8/31/2020 – 9/4/2020*
Contract Details:
• Underlying Stock: CRM
• Call or Put: Call
• Expiration Date: September 4, 2020
• Strike Price: $280
How This Loss Occurred
CRM’s stock price decreased from roughly $272 to about $255 between 8/31/2020 – 9/4/2020.
When investing in a Call Contract, you believe that the underlying stock price will reach the strike price of the contact. In this case, CRM’s stock price decreased, rather than increase towards the strike price. Since the belief was that CRM’s stock price would increase to $280, the contract lost 99.7% of its value.
On August 31, 2020, CRM’s Call Contract at the $280 strike price last sold for $3.41.
|
Last |
Mark |
Bid |
Ask |
Exp |
Strike |
| 100 (Weeklys) | |||||
|
3.41 |
3.375 |
3.05 |
3.70 |
4 Sep 20 |
280 |
On September 4, 2020, CRM’s Call Contact at the $280 strike price last sold for $.01. The contract’s price decreased because CRM’s underlying stock price decreased. The belief was that the stock price would increase to $280.
|
Last |
Mark |
Bid |
Ask |
Exp |
Strike |
| 100 (Weeklys) | |||||
|
.01 |
.005 |
0 |
.01 |
4 Sep 20 |
280 |
The Math:
3.41 – .01 = 3.40
3.40/3.41 = 99.7% loss
$500 x .997 = $498.50
$500 – $498.50 = $1.50
As you can see above, options can move quite a bit! We hope this helped you get a sense of the opportunities versus risks that lie in the market. If you’re looking to become an informed options trader/investor, we have free education to help you get there.
Important information
Any examples or illustrations provided are hypothetical in nature and do not reflect results actually achieved and do not account for fees, expenses, or other important considerations. These types of examples are provided to illustrate mathematical principles and not meant to predict or project the performance of a specific investment or investment strategy. Accordingly, this information should not be relied upon when making an investment decision.
Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See Characteristics and Risks of Standardized Options. Visit TradeStation.com/Pricing for full details on the costs and fees associated with options.
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