Options

This is one of the illustration made for options :

What is Option?? Here's the illustration :
I wanna buy Mr. John's House in April 08 for 1 Trillion Rupiah price.. But the transcation will be happen on April 09 (In the other words, I booked the house first). And then, me and Mr.John made an agreement, which I should deposit for 10Million Rupiah for the front cash. The agreement stated that, I can buy his house for 1 Trillion Rupiah on April 09 (No matter what happened).. Worst case, If i don't contact him back on April 09 (When the contract expired, the 10Million Rupiah money can not be refund back to me, AND Mr.John can sell it to anyone else who are interested)..

Okay,
First Possibility :
In that house, a little gold mine was founded beyond the house, which appreciate the house price into 100 Trillion Rupiah. What happened? According to agreement, I can still buy the house @ the 1 Trillion Rupiah price. AND OF COURSE, i can sell it later with 100Trillion Rupiah price.. CUAN ABIS =p

Second Possibility (Worst Case) :
The house has a worst drainase, and got a lot to be fixed later.. Or by rumours, it was haunted. Nah, in this situation, I'm gonna let the contract expired and let the 10Million Rupiah gone. (Why I should buy the depreciated house?? LOSS in the end


Conclusion :
Max gain that was generated from the first possibilites :
-> 10oT - (1T + 10Million)

Max loss that was generated from the second possibilities :
-> Max 10 Million (Expired contract)


In the other words, I can earn a 400% gain approximately, and I can press the loss level until 0.01%. (Risk management is more applicable in this type of investments). We hope Options will become more liquid such as mutual funds later here, in Indonesia (Maybe a couple of years later).


Generated from @ANCOLL
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