AAPL Options Question...?

<<<I'm looking at buying a call option in Apple for $214 whose strike is $195 and that expires in January 2014.>>>

I am assuming you mean the January 2015 call option since that is the only $195 strike price that shows a price of $214. The problem is that the $214 figure has nothing to do with how much it would cost you to buy the option. $214 represents the price at which the option last traded. The amount you would have to pay if you bought the option today would be over $249.10 (the current bid quote), probably $251.30 (the ask quote).

<<<Can I exercise the call option regardless of whether or not I owned shares prior to the option purchase?>>>

Yes, as long as you have $19,500 available for each option exercised.

<<<Is there a limit on the number of times I can exercise this option before it expires?>>>

Yes. An option can only be exercised once. Once it is exercised the option contract is closed and no longer exists.

<<<How would I find out how many shares an options contract covers?>>>

For any standard stock options or LEAPS contract traded in the United States the underlying is 100 shares. The premiums are shown as a per share price, so it would cost you about $25,130 for each contract you bought at today's prices.

The option exchanges recently started trading "mini-options" on a small number of stocks, including Apple. For these mini-options the number of shares per contract is 10 instead of 100. It appears the lowest lowest strike price for January 2015 Apple minis is $330.

If you get your quotes from a montage that includes the symbols for the options you can recognize the mini-options because the sympol begins with AAPL7. The CBOE quote montage at

http://www.cboe.com/DelayedQuote/QuoteTable.aspx

will show both the normal and the mini options.

It appears the Google quote montage does not show either any symbols or any mini-options.

<<<If I intend only to exercise the option, what is the risk in this transaction?>>>

$25,130 which is the amount you would pay to purchase the contract. It is the amount you would lose if the stock was below $195 on January 17, 2015 and you had not closed your position by exercising or selling the contract.

Hi thurbs190, how are you?

If you can purchase that AAPL 195 Jan 14 call for $214, when the current closing price of the option is $249.75bid and $250.90ask (as at closing price on 24th May 2013), that would be a pretty sweet deal. Unfortunately, it is quite unlikely, considering the closing price of the stock is $445.15 and the intrinsic value of the option is $250.15 (i.e.: stock price minus strike price = $445.15 minus $195). Beware though, you are not just purchasing the option for 1 share in Apple when you purchase an option, since each option represents 100 shares of Apple. So, by purchasing 1 call option in Apple at $250 or so, you are actually paying $25,000 for that option in order to control 100 shares of Apple.

Now, I'll focus on the other questions for you:

(1) Yes, you can exercise the call option regardless of whether or not you owned shares prior to the option purchase. Exercising this call option would allow you to purchase 100 Apple shares at $195 each, plus the cost of exercising the option (which is usually about $30 or so, depending on your broker). But you'd better have access to the $19,500 that would be required to complete the transaction of buying the shares!!

(2) Yes, there is a limit on the number of times you can exercise this option before it expires. Once an option is exercised, then that is it. The option exists no more. You can think of this as converting your option into shares, really.

(3) All options contracts for shares in the United States cover 100 shares, but some companies (including Apple and Google) are now offering "mini options" which allow you to purchase an options contract that covers only 10 shares, instead of 100 shares. You can read more about this at the following web-link: http://www.reuters.com/article/2013/03/15/us-optio...

(4) The risk in this transaction, as with all contracts involving the purchase of call options, is the amount that you originally paid for the options contract.

Hope that helps!! Cheers!!

Yes

Yes, 100 shares

Google/Bing ...... it

AAPL has to meet the strike price and be in the money in real time. If not, you loose the premium/ticker price of the option times 100. Considering that AAPL is $445.15, it would need to go down to being in the money in avg 6 months. No one is going to buy AAPL at avg $445 to $345 and sell it in a call at $195 ($214)

In the money means that your stock option is worth money and you can turn around and sell or exercise it. For example, if John buys a call option on ABC stock with a strike price of $12, and the price of the stock is sitting at $15, the option is considered to be in the money. This is because the option gives John the right to buy the stock for $12 but he could immediately sell the stock for $15, a gain of $3. If John paid $3.50 for the call, then he wouldn't actually profit from the total trade, but it is still considered in the money.