Options Trading Tutorial

i have a questionn regarding option trading,can some1 help please?

for example: if i buy a call option with strike price of $60 expired in sept 2008 for $4. the stock price currently is $30. Two days later, the price jumps to $48, and the price for my call now is worth $6. what should i do with the call option? can i sell it back to the writer and get the $2 proift even though it is out of the money?

Public Comments

1. Assuming you bought your call option on the open market, you can always sell it at any time. The sale won't necessarily be to the person you purchased it from (the call writer). As for whether you should sell now, that's a more difficult question. A $4 premium on a strike that was double the stock price seems very high to me for a 5 month option. But if the stock increased that much in 2 days, the volatility must be very high. You still have 5 months left before option expiration. You have to look at the characteristics of the underlying stock and its stock chart to see what the best course of action is. Some of these momentum stocks can run up (and down) hugely in a matter of days. Why did the stock go from $30 to $48? If it was due to a buyout at a price of $48, then you should sell the option as it is unlikely that a $60 buyout price will emerge. Options are very risky and should only be used by people who know what they are doing.
2. Yes you can sell it if there is a buyer (needn't be the writer). The movement is due to the volatility. Remember "Traded options are for trading"