[GrunchCan]

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i hope (for the sake of the forum) your post didnt get any worse.

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It did.

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4) Stocks are actually options. They are an option on the value of a company exceeding it's liabilities (debts).

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Wrong. In fact, this doesn't even make any sense.

There are 2 kinds of options: calls and puts. I’ll describe call options now, and puts in a moment.

When you buy a call option, you buy a contract that gives you the right to buy a specified stock at a specified price on or before a specified date. The stock is called the “underlying,” the prearranged price is called the “strike price,” and the specified date is the “expiration date.”

This contract is not free – it comes at a price that is at least loosely based on a “theoretical value” for that contract. For example, as I type this IBM stock is trading at $89.96 per share on the NYSE. IBM call contracts with a strike price of $80 (giving the contract owner the right to buy IBM stock at $80.00), and an expiration date in July are going for $12.30 per share on the CBOE. If you were to buy the contract and exercise at that same moment, you would end up owning 1 share of IBM stock but you would have paid a total of $92.30 for it ($80 for the strike price + $12.30 for the option itself).

That doesn’t mean options are bad – they have their place. In fact, there are lots of professional traders who do nothing but trade options.

There are also put options. They are the same as call options, with 1 difference. Instead of being a contract to buy stock at a specified price, put options are a contract to sell stock at a specified price. Everything else is the same.

You can either buy or sell options. If you sell an option, you don't have to own one first. You can just write up your own options contract and sell it in the marketplace. This is different than the stock market. In the stock market, there are X shares of ABC company that traders buy & sell amongst themselves. But in the options market, contracts come in to and go out of existance all the time.

Options aren’t for everyone, but it is absolutely incorrect to suggest that they have no place in a diversified investment portfolio. And it is wrong to imply that anyone trying to sell you an option is trying to rip you off. I haven’t given you enough information to be able to trade in options profitably – or even safely. Options could carry a great deal of risk. It would be a very bad idea for anyone reading this to execute options trades if the extent of your options knowledge is this post. You could lose your shirt. I'm serious - you could really get in to serious trouble if you don't know what you are doing. Much more trouble than just buying & selling stocks.