Aug
02
2023
In the Money (ITM) vs Out of the Money (OTM) Options

In the Money vs Out of the Money Options: Main Differences

By | Growing Wealth, invest, Investing | Comments Off on In the Money vs Out of the Money Options: Main Differences

In options trading, knowing the difference between being “in the money” (ITM) and “out of the money” (OTM) allows the holder of a contract to know whether they’ll enjoy a profit from their option. The terms refer to the relationship between the options strike price and the market value of the underlying asset.

“In the money” refers to options that have profit potential if exercised today, while “out of the money” refers to those that do not. In the rare case that the market price of an underlying security reaches the strike price of an option exactly at the time of expiry, this would be called an “at the money option.”

What Does “In the Money” Mean?

In the money (ITM) describes a contract that would be profitable if its owner were to choose to exercise the option today. If this is the case, the option is said to have intrinsic value.

A call option would be in the money if the strike price is lower than the current market price of the underlying security. An investor holding such a contract could exercise the option to buy the security at a discount and sell it for a profit right away.

Put options, which are a way to short a stock, would be in the money if the strike price is higher than the current market price of the underlying security. A contract of this nature allows the holder to sell the security at a higher price than it currently trades for and pocket the difference.

In either case, an in the money contract has intrinsic value, so the options trader can exercise the option and make money doing so.


💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Example of In the Money

For example, say an investor owns a call option with a strike price of $15 on a stock currently trading at $16 per share. This option would be in the money because its owner could exercise the option to realize a profit. The contract gives the holder the right to buy 100 shares of the stock at $15, even though the market price is currently $16.

The contract holder could take shares acquired through the contract for a total of $1,500 and sell them for $1,600, realizing a profit of $100 minus the premium paid for the contract and any associated trading fees or commissions.

While call options give the holder the right to buy a security, put options give holders the right to sell. For example, say an investor owns a put option with a strike price of $10 on a stock that is trading at $9 per share. This would be an in the money option. The holder could sell 100 shares of stock at a price of $10 for a total of $1,000, even though it only costs $900 to buy those same shares. The contract holder would realize that difference of $100 as profit, minus the premium and any fees.

What Does “Out of the Money” Mean?

Out of the money (OTM) is the opposite of being in the money. OTM contracts do not have intrinsic value. If an option is out of the money at the time of expiration, the contract will expire worthless. Options are out of the money when the relation of their strike prices to the current market price of their securities are opposite that of in the money options.

For calls, an option with a strike price higher than the current price of the underlying security would be out of the money. Exercising such an option would result in an investor buying a security for a price higher than its current market value.

For puts, an option with a strike price lower than the current price of its security would be out of the money. Exercising such an option would cause an investor to sell a security at a price lower than its current market value.

In either case, contracts are out of the money because they don’t have intrinsic value – anyone exercising those contracts would lose money.

Example of Out of the Money

Say an investor buys a call option with a strike price of $15 on a stock currently trading at $13. This option would be out of the money. An investor might buy an option like this in the hopes that the stock will rise above the strike price before expiration, in which case a profit could be realized.

Another example would be an investor buying a put option with a strike price of $7 on a stock currently trading at $10. This would also be an out of the money option. An investor might buy this kind of option with the belief that the stock will fall below the strike price before expiration.


💡 Quick Tip: In order to profit from purchasing a stock, the price has to rise. But an options account offers more flexibility, and an options trader might gain if the price rises or falls. This is a high-risk strategy, and investors can lose money if the trade moves in the wrong direction.

What’s the Difference Between In the Money and Out of the Money?

The premium of an options contract involves two different factors: intrinsic value and extrinsic value. Options that have intrinsic value at the time they are written to have a strike price that is profitable relative to the current market price. In other words, such options are already in the money when written.

But not all options are written ITM. Those without intrinsic value rely instead on their extrinsic value. This value comes from speculative bets that investors make over a period of time. For this reason, assets with higher volatility often have their options contracts written out of the money, as investors expect there to be bigger price swings. Conversely, assets considered to be less volatile often have their options written in the money.

Options written out of the money are ideal for speculators because such contracts come with less expensive premiums and are often created for more volatile assets.

Recommended: Popular Options Trading Terminology to Know

Should I Buy ITM or OTM Options?

The answer to this question depends on an investor’s goals and risk tolerance. Options that are further out of the money can be more rewarding, but come with greater risk, uncertainty, and volatility. Whether an option is in or out of the money (and how far they’re out of the money), and the amount of time before the expiry of the option impacts the premium for that option, with riskier options typically costing more.

Whether to buy ITM or OTM options also depends on how confident an investor feels about the future of the underlying security. If a trader feels fairly certain that a particular stock will trade at a much higher price three months from now, then they might not hesitate to buy a call option with a very high strike price, making it out of the money.

Conversely, if an investor thinks a stock will fall in price, they can buy a put option with a very low strike price, which would also make the option out of the money.

Beginners and those with lower risk tolerance may prefer buying options that are only somewhat out of the money or those that are in the money. These options usually have lower premiums, meaning they cost less to buy. There are also generally greater odds that the contract will wind up in the money before expiration, as it will take a less dramatic move to make that happen.

Investors can also choose to combine multiple options legs into a spread strategy that attempts to take advantage of both possibilities.

Recommended: 10 Important Options Trading Strategies

The Takeaway

In options trading, “in the money” refers to options that have profit potential if exercised immediately, while “out of the money” refers to those that don’t. Options contracts don’t have to be exercised to realize a profit. Sometimes investors buy contracts with the intent of selling them on the open market soon after they become in the money for quick gains.

In either case, it’s important to consider if an option is in the money or out of the money when buying or writing options contracts, as well as when deciding when to execute them. Options trading is an advanced investing strategy, and investors should know what they’re doing before engaging with it – or should speak with a financial professional for guidance.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

Photo credit: iStock/damircudic

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN0723065

Read more
Aug
02
2023

Top 12 Jobs for Skilled Seniors That Pay Well in 2024

By | Budgeting & Goals, Preparing for Retirement, relay | Comments Off on Top 12 Jobs for Skilled Seniors That Pay Well in 2024

For a growing number of Americans, turning 65 no longer automatically means retirement. As of May 2022, 21.9% of Americans 65 and older were working, compared with 19.5% in May 2020, according to a survey conducted by MagnifyMoney.

If you want to keep up the 9 to 5 into your golden years, there’s a wide range of options for you to explore. This is especially true if you’re a skilled senior interested in full-time employment.

Tips When Finding a Job as a Senior

There are pros and cons and working after retirement. If returning to the daily grind is right for you and your financial situation, then there are a few things you’ll want to keep top of mind:

•   Weigh the pros and cons of working for a company versus freelancing or consulting.

•   Think about whether you’d prefer to work from home or go into an office or to a job site.

•   Read the job listing carefully, paying close attention to the requirements listed.

•   Remove graduation dates from your resume unless they’re fairly recent.

•   Include a couple of your key accomplishments in a cover letter.

•   During an interview, be sure to strategically share key career highlights from the past 10 to 15 years, and spotlight the ways in which you’ve kept your skills up to date.

•   Move ahead with confidence!

Check your score with SoFi

Track your credit score for free. Sign up and get $10.*

12 Jobs for Skilled Seniors That Pay Well

Working can help provide seniors with a degree of financial security as well as other benefits, such as connecting with coworkers and creating a sense of purpose. Let’s take a closer look at jobs for skilled seniors that suit a variety of skills and interests.

#1: Teacher

If you have the appropriate credentials, teaching can be a rewarding job. Don’t fret if you don’t have the right credentials — you might still be able to land a position. Many high schools, career centers, and community colleges may be open to hiring experienced people to teach general interest or professional development courses. Educational organizations may also be seeking teaching assistants or tutors, both of which can be excellent jobs for skilled seniors.

#2: Government Worker

Government jobs can offer competitive salaries along with good benefits, often including a nice pension. Even after you stop working at a federal government job, you may be eligible for the Federal Employees Health Benefits Program.

Depending on your background, education, and work experience, you may be qualified for roles with the National Institutes of Health, which participates in jobs fairs specifically for workers aged 55 and up; the Peace Corps; the U.S. Army Corps of Engineers; the U.S. Fish and Wildlife Service; and more.

#3: Tax Preparer

Interested in becoming a tax preparer? If you have an accounting background, then this type of work may be a natural fit. That said, you don’t need to be a certified accountant — you just need to obtain a Preparer Tax Identification Number from the IRS and pass a competency exam.


💡 Quick Tip: Check your credit report at least once a year to ensure there are no errors that can damage your credit score.

#4: Real Estate Agent

You can earn a good income helping people buy and/or sell their home or property. But there’s another selling point to being a real estate agent: the ability to set your own schedule, as long as you can still satisfy your clients. In fact, this flexibility can be useful if you’re deciding whether you want to work part time or full time. Before you start working, you’ll need to get a license, and requirements vary by state.

#5: Bank Teller

You typically only need a high school diploma or the equivalent to qualify for a bank teller’s job, and you may be required to undergo a short period of on-the-job training. In this position, you’d handle the standard transactions at the financial institution. So if you’re comfortable handling a steady flow of cash and enjoy working with customers, this could be a job to consider.

#6: Medical Biller

A medical biller works for a healthcare organization such as a hospital or doctor’s office and is responsible for appropriately billing insurance companies, managing the status of claims, and addressing problems that arise. This is one of those jobs for skilled seniors that require organization and the ability to follow through — in this case, with both patients and the insurance companies.

Recommended: How to Negotiate Medical Bills

#7: Virtual Assistant

Plenty of small businesses in the United States need help with daily administration tasks. Depending on your skills, virtual tasks could include making phone calls, managing emails, scheduling appointments, maintaining calendars, offering bookkeeping services, handling social media, and so forth. Although many virtual assistant jobs are part time, if you wanted more work, you could have multiple clients to whom you provide your services.

#8: Telework Nurse or Doctor

Telehealth services have greatly expanded since the start of the pandemic, and demand for remote healthcare providers remains high. If you’re a recently retired nurse or doctor, and are still licensed, you may want to explore a telehealth position. It could allow you to continue providing care but from the comfort of home (or a home office).

#9: Counselor

Forty-seven percent of Americans live in an area with a shortage of mental health care professionals, according to data from the Kaiser Family Foundation. If you’re a retired counselor or therapist and are interested in working again, re-entering the field could allow you to provide much-needed services.

#10: HVAC Technicians

From installation to maintenance to repairs, HVAC pros can find themselves in great demand all year long. If you have this kind of experience, or are handy and able to incorporate HVAC into your skill sets, then this type of work can be a steady source of income.

Recommended: What Is the Cost to Replace an HVAC System?

#11: Paralegal

Busy attorneys need plenty of help researching information, creating documentation, and contacting clients. If you have the education and experience — and you’re highly organized and able to multitask — then a paralegal job may be right for you.

#12: Grant Writer

Grant writing is a specialized type of writing where you’d write proposals to help nonprofits and other agencies to obtain funding for their programs. To succeed at grant writing, it’s important to research the requirements and deadlines of the funding, write compelling proposals to receive the grant dollars, follow up with the proposals, and write reports about them.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

Your golden years are what you make of them — and for some, that can mean re-entering the workforce or pursuing a new, rewarding career path. Fortunately, there are plenty of jobs for skilled seniors that suit different skills and interests and provide a source of extra income.

See exactly how your money comes and goes at a glance.

FAQ

Can seniors still work full time and receive Social Security benefits?

According to the Social Security Administration, the answer is “yes.” If you’ve already reached your full retirement age, then you can work and earn as much as possible without a reduction in benefits. If you aren’t yet at full retirement age, then you can earn up to $21,240 in 2023 without a reduction. For income earned beyond that annual limit, your benefits would be lowered by $1 for each $2 earned.

What types of job skills are in high demand?

Management and leadership skills are appreciated by many employees, and these are skills seniors may well have developed over the years. It’s important to be able to effectively communicate, both verbally and in writing, and to work well with others. For many jobs, sales and marketing abilities are key, while in others the ability to research and analyze are crucial. Note that these are general categories. Specific skills will depend upon the job you’re applying for.

What type of work-life balance should working seniors expect?

Maintaining a work-life balance is especially important for working seniors. As you consider re-entering the workforce, you’ll want to consider your physical and mental health as well as your finances, and ensure that whatever job you take on will fit in your lifestyle. As an older adult, you may discover that you don’t have quite as much stamina as you once did. On the other hand, having children out of the home and on their own may open up more time than you expected.

Photo credit: iStock/Vesnaandjic

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL0423013

Read more
Aug
02
2023
How to Trade ETFs: X Strategies for Retail Investors

How to Trade ETFs: A Guide for Retail Investors

By | Growing Wealth, invest, Investing | Comments Off on How to Trade ETFs: A Guide for Retail Investors

Trading ETFs is, in many ways, similar to trading stocks or other securities, and can be done on most stock-trading platforms or brokerages. And while conventional wisdom suggests investors are limited in what they can do with an exchange-traded fund (ETF), an investor can almost certainly buy into a fund based on portfolio needs.

But investors have different goals and strategies, and that may include trading or otherwise buying and selling ETFs frequently. Trading ETFs is fairly simple, though, and investors would do well to know how to trade ETFs.

What Is an ETF (Exchange-Traded Fund)?

An exchange-traded fund is a popular investment vehicle that enables investors to buy a group of stocks in one bundle, thus promoting investment diversity and efficiency. They’re widely available, usually through major investment fund companies.

ETFs aren’t mutual funds, although they originate from the same fund investment family. The primary differences between the two is that mutual funds are usually more expensive than exchange traded funds.

Another benefit of ETFs is that whereas mutual funds can only be traded after the end of the market day, ETFs can be traded during open market sessions at any point in the day. ETFs have become wildly popular, too, over the years.


💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Different Types of ETFs

ETFs come in a variety of different types, including the following:

•   Stock ETFs: This type of ETF is composed of various equity (stock) investments.

•   Bond ETFs: Bond funds hold different types of bond vehicles, like U.S. Treasury bonds, utility bonds, and municipal bonds.

•   Commodities: Commodity ETFs are popular with investors who want gold, silver, copper, oil, and other common global commodities.

•   International ETFs: Global-based ETFs usually include country-specific funds, like an Asia ETF or a Europe ETF, which are made up of companies based in the country featured in the ETF.

•   Emerging market ETFs: This type of ETF is composed of stocks from up-and-coming global economies like Indonesia and Argentina.

•   Sector ETF: A sector ETF focused on an economic sector, like manufacturing, health care, climate change/green companies, and semiconductors, among others.

Recommended: Tips on How to Choose The Right ETF

4 Reasons to Consider Trading ETFs

Trading ETFs offers the same advantages (and risks) associated with trading common stocks. These features and benefits are at the top of the list.

1. ETFs Provide Liquidity

In a multi-trillion dollar market, there is likely no shortage of investors looking to buy and sell ETFs. By and large, the bigger the market, the more liquidity it provides, and the easier it is to move in and out of positions.

2. There are Different Investment Options

With ETFs widely available in categories like stocks, bonds, commodities, and more recently, green industries and others, ETF traders have plenty of investment options.

3. ETFs Offer Portfolio Diversity

Investment specialists often extol the virtue of a diverse portfolio, i.e. one made up of both conservative and more aggressive investments that can balance one another and help reduce risk. With so many classes of ETFs available, it’s relatively easy to build an ETF trading portfolio that has different asset classes included.

4. ETFs Are Relatively Inexpensive to Trade

Exchange-traded funds are typically inexpensive to buy — the average fee for buying an ETF is just under 0.20 percent of the total asset purchased. Some brokerage platforms may offer commission-free ETFs.

What Are the Risks of Trading ETFs?

The main risk associated with trading ETFs is the same as with trading stocks — you could lose money. While shedding cash is always a threat when trading any security, the liquidity associated with exchange-traded funds makes it relatively easy to sell out of a position if needed. A candid conversation with a financial advisor may help investors deal with ETF investment trading risks.

How to Trade ETFs

Just as you can trade stocks, you can trade ETFs, too, by taking these steps.

Step 1. Choose a Trading Platform

Traditionally, investors trade stocks through a brokerage house or via an online broker more recently, on alternative trading platforms where investors can buy partial shares of a stock. As with most things in life, it’s generally a good idea to look around, kick some proverbial tires, and choose a broker with the best ETF trading services for you.

Investors can choose from different categories of ETF trading accounts, ranging from standard trading accounts with basic trading services to retirement accounts, specialty accounts, or managed portfolio accounts that offer portfolios managed by professional money managers.

Step 2. Select an ETF Trading Strategy

The path to successful ETF trading flows through good, sound portfolio construction and management.

That starts with leveraging two forms of investment strategy — technical or fundamental analysis.

•   Technical analysis: This investment strategy leverages statistical trading data that can help predict market flows and make prudent ETF trading decisions. Technical analysis uses data in the form of asset prices, trading volume, and past performance to measure the potential effectiveness of a particular ETF.

•   Fundamental analysis: This type of portfolio analysis takes a broader look at an ETF, based upon economic, market, and if necessary, sector conditions.

Fundamental analysis and technical analysis can be merged to build a trading consensus, typically with the help of an experienced money manager.

Any trading strategy used to build ETF assets will also depend on the investor’s unique investment needs and goals, and will likely focus on specific ETF portfolio diversification and management. For example, a retiree may trade more bond ETFs to help preserve capital, while a young millennial may engage in more stock-based ETF portfolio activity to help accumulate assets for the long haul.

Step 3. Make the Trade

Executing ETF trades is fairly straightforward for retail investors. It may be best to consider starting out with small positional trading, so that any rookie mistakes would be smaller ones, with fewer risks for one’s portfolio.

Here are two trading mechanisms that can get you up and running as an ETF trader:

•   Market order. With market order trading, you buy or sell an ETF right now at the current share price, based on the bid and the ask — the price attached to a purchase or a sale of a security. A bid signifies the highest price another investor will pay for your ETF and the ask is the lowest price an ETF owner will sell fund shares. The difference between the two is known as the trading “spread.”

A word of caution on market trades. ETFs tend to have wider trading spreads than sticks, which could complicate you’re getting the ETF shares at the price you want. Share trading spreads of 10% are not uncommon when trading ETFs.

•   Limit trade orders. An ETF limit order enables you to dictate terms on an ETF purchase or sale. With a limit order, you can set the top price you’ll pay for an ETF and the lowest price you’ll allow when selling an ETF.

For investors who have qualms about buying or selling an ETF at a fixed price, limit orders can be a viable option, as they allow the investor to set the terms for a trade and walk away from an ETF trade if those terms aren’t met.


💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

The Takeaway

Historically, exchange traded funds have been used primarily as passive, “buy and sell investments.” But as asset trading grows more exotic in the digital age, trading ETFs has become increasingly popular. It’s fairly simple to trade ETFs, too, as most investors simply need access to an online trading platform or brokerage.

As with any investment, though, there are risks to consider. While ETFs can be a great starting point for many investors, they’re not entirely safe investments, and investors should do their research before buying shares of any specific ETF, as they would with any other type of security.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

Photo credit: iStock/PeopleImages

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN0723067

Read more
Aug
02
2023
Comparing Warrants vs Options

Comparing Stock Warrants vs Stock Options

By | Growing Wealth, invest, Investing | Comments Off on Comparing Stock Warrants vs Stock Options

Stock warrants give the holder the right to buy shares of stock at a set price on a set date directly from the public company that issues them, whereas stock options convey the right to buy or sell shares on or before a specific date at a specific price.

The chief difference between stock warrants and stock options is that warrants are issued directly by a company that’s seeking to raise capital. Stock options are derivative contracts that investors can trade, in order to take advantage of price fluctuations in the underlying security.

What Are Stock Warrants?

A stock warrant is a contract that allows the holder the right to buy shares of stock at a future date at a specified price. The wording in a stock warrant typically allows the holder to purchase shares at a premium to the stock’s price at the time of issue.

Companies issue stock warrants directly to investors. The companies set the terms of the warrant, including the stock’s purchase price and the final date by which the investor can exercise the warrant. Warrant holders do not have an obligation to buy the shares, but if they decide to do so they would exercise the warrants via their brokerage account.

Public companies may issue stock warrants as a means of raising capital to fund new expansion projects. A company may also issue stock warrants to investors if it faces financial trouble and needs to raise funds to avoid a bankruptcy filing.


💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

What Are Stock Options?

A stock option is a contract that gives holders the right — not the obligation — to buy or that represents the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put option) an underlying security on or before a specified date at a specified price. With stock options, holders of the contract do not have to buy the underlying shares, but they have the right to do so.

Again, the options holder does not have to buy; they simply have the right to do so. Exercising options means you agree to buy the shares If an investor chooses not to exercise the option, it expires worthless. Investors can trade some options on a public exchange alongside stocks and other securities.

Recommended: How to Trade Options: An In-Depth Guide

Similarities and Differences Between Warrants and Options

Warrants and options sound alike and at first glance, they seem to imply the same thing: A right to trade shares of a particular stock. But there are also important differences between these two contracts that investors need to understand.

Similarities

Warrants and options both offer investors an opportunity to gain exposure to a particular stock without requiring them to purchase shares.

With both warrants and options, the investor must exercise the security to actually acquire shares. Both have specific guidelines with regard to the price at which investors can purchase (or sell in the case of put options) their shares and the deadline for exercising them.

Warrants and options are both speculative in nature, since investors are essentially betting on which way the underlying asset’s price will move. Investors can use different strategies when trading options or exercising warrants to maximize profitability while minimizing losses.

Differences

Warrants and options also have important differences. While companies issue stock warrants, traders typically buy and sell options with each other directly. Warrants create new shares of companies, while options do not cause any dilution.

When investors exercise a warrant, they receive the stock directly from the company, while options are settled between traders.


💡 Quick Tip: If you’re an experienced investor and bullish about a stock, buying call options (rather than the stock itself) can allow you to take the same position, with less cash outlay. It is possible to lose money trading options, if the price moves against you.

Stock Warrants vs Stock Options: A Summary

Here’s a closer look at options vs. warrants.

Stock Warrants

 Stock Options
Confers the right to purchase shares of stock at a specified price on a specified date. Confers the right to buy (in the case of a call) or sell (in the case of a put) shares of stock at a specified price on or before a specified date. Holders of the contract have the right, but not the obligation, to exercise the contract.
Warrants create new shares, which can result in dilution. Options do not create new shares so there’s no dilution.
Issued by the company directly to investors. Issued by traders who write call or put options.
Original issue warrants are not listed on exchanges, but there is a secondary market for the securities. Options can be traded on public exchanges alongside other securities.
Used to raise capital for the company. Traders can write options to maximize profits based on price movements.
Warrant holders may have a decade or more in which to exercise their right to buy shares. Options tend to be shorter-term in nature, with expiration periods lasting anywhere from a few days up to 18 months.
Less commonly used in the U.S. Options are regularly traded on public exchanges in the U.S.

Pros and Cons of Warrants

If you’re considering warrants versus options, it’s helpful to understand the advantages and disadvantages of each.

Stock warrants can offer both advantages and disadvantages to investors. Whether it makes sense to include stock warrants in a portfolio can depend on your individual goals, time horizon for investing and risk tolerance.

Stock Warrant Pros

 Stock Warrant Cons
Warrant holders have the right to purchase shares of stock but are not required to do so. Price volatility can diminish the value of stock warrants over time.
Stocks may be offered to investors at a premium price to the current market price. When warrants are exercised, new shares are issued which can result in dilution.

Pros and Cons of Options

Like stock warrants, there trading stock options has both upsides and potential downsides. Beginning traders may benefit from having a guide to options exercising to help them understand the complexities and risks involved. Here are some of the key points to know about trading options.

Stock Option Pros

 Stock Option Cons
Higher return potential compared to trading individual shares of stock. Stock options are more sensitive to volatility which can mean higher risk for investors.
May be suited to active day traders who are hoping to capitalize on short-term price movements. Frequent options trades can mean paying more in commissions, detracting from overall returns.
Traders can use options as a hedging tool to manage risk in uncertain market environments. Time value constantly decays the value of options.

The Takeaway

Understanding the difference between options and warrants matters if you’re considering either of these types of securities. While the language of stock warrants may sound similar to some of the terms used in options trading, these are really two different instruments.

Companies issue stock warrants largely to raise capital, whereas traders typically buy and sell options with each other directly. Warrants create new shares of companies, while options do not cause any dilution.

Qualified investors who are ready to try their hand at options trading, despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to trade through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.


Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Is a warrant the same thing as an option?

No. Warrants and options are not the same thing. Companies issue stock warrants to give investors the right to buy shares of stock at a specified price on a specified date. Stock warrants can allow investors to purchase shares of stock at a premium while giving them plenty of time in which to decide whether to exercise the warrant.

Options are derivatives contracts that give buyers the right, but not the obligation to buy (in the case of a call) or sell (in the case of a put) an asset at a specific price within a certain period of time.

Can warrants exist in a SPAC?

Yes. A Special Purpose Acquisition Company, SPACs, are typically created for the purpose of acquiring or merging with an existing company. This type of arrangement allows private companies to circumvent the traditional IPO process. A SPAC may use warrants to raise capital from investors. These warrants are generally good for up to five years following the completion of a merger or acquisition.

Photo credit: iStock/Inside Creative House

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN0623073

Read more
Aug
02
2023
woman studying on laptop

Important College Application Deadlines

By | Going to College, Student Loans, student_loan | Comments Off on Important College Application Deadlines

High school students don’t get enough credit for the many balls they have to juggle when preparing to apply for college. Alongside going to school and doing homework, they may spend time studying for standardized tests, participating in extracurriculars, and volunteering in their community, with the hopes of standing out in their college applications.

On top of all that work, high school students also have to manage the many deadlines that are a major part of the college application process. A bit stressful right? Especially when you consider the fact that applying to college costs money.

In order to make the whole experience a bit more seamless, we’ve rounded up important college application deadlines that are helpful for students to track. That way, instead of worrying about missed deadlines, you can jot these dates down and get back to hitting the books.

SAT Deadlines

While the SAT is not the only college entrance exam that students take, it is the one that is more commonly utilized by universities and colleges during the admissions process. This exam is administered by the College Board and is intended to measure the student’s readiness for college.

Typically, high school students will take the SAT starting in the spring of their Junior year and ending in the fall of their junior year. Some students choose to take the test multiple times throughout this time period. The SATs are available to take each year in the months of March, May, June, August, October, November, and December.

While the official testing dates will vary on a year-to-year basis, these are the anticipated dates for registration and testing for the 2023-2024 school year. SAT subject tests are not necessarily available to take on all of these dates.

SAT Test Date

 Registration Deadline

 Deadline for Regular Cancellation
August 26, 2023 July 28, 2023 August 15, 2023
October 7, 2023 September 8, 2023 September 26, 2023
November 4, 2023 October 6, 2023 October 24, 2023
December 2, 2023 November 3, 2023 November 21, 2023
March 9, 2024 February 23, 2024 February 27, 2024
May 4, 2024 April 19, 2024 April 23, 2024
June 1, 2024 May 17, 2024 May 21, 2024

When it comes time for students to provide their scores to colleges, they will do so when they submit their complete application. Application deadlines will vary by school, but there are some common deadlines worth considering.

For regular decision applications (not early decision), the most common deadline is January 1st. Many schools also have a January 15th deadline. The main exception to these January deadlines is the University of California system which has a much earlier deadline of November 30th for all schools in their system.
Some schools offer later deadlines in February, March, or April, but this is less common.


💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

ACT Deadlines

Similar to the SAT, the ACT is a college entrance exam that colleges and universities use during the admission decision process. Also like the SAT, the ACT is designed to evaluate how ready a high school student is for college. ACT test scores are taken into consideration during the admission process by the colleges that require them.

Students take this exam during the same time period as the SAT, from the spring of their junior year to the fall of their senior year. Students can choose to take this test multiple times in the hope of improving their score before they submit their college applications.

Each year, the ACT is offered in the months of February, April, June, July, September, October, and December. The one exception being that there are no tests scheduled in July or February in New York, or in the month of July in California.

The official testing dates vary each year, but the following dates are available for registration and testing for the 2023-2024 school year.

Test Date

 Registration Deadline

 Late Registration Deadline

 Photo Upload & Standby Deadline
September 9, 2023 August 4 August 18 September 1
October 28, 2023 September 22 October 6 October 20
December 9, 2023 November 3 November 17 December 1
February 10, 2024 January 5 January 19 February 2
April 13, 2024 March 8 March 22 April 5
June 8, 2024 May 3 May 17 May 31
July 13, 2024 June 7 June 21 July 5

Just like with their SAT scores, students will submit their ACT when they complete their college applications. The ACT automatically sends the students scores from the ACT test directly to the schools of their choice.

Recommended: Ultimate College Application Checklist

The Common Application Deadlines

The Common Application is a highly convenient option for many students applying to more than one college. With just one application, students can apply to more than 900 schools in the U.S. and internationally. The Common App even helps students manage the many application deadlines they may be facing.

In each student’s “Dashboard” through The Common App, they will be alerted of their application deadlines. To meet an application deadline, the student must submit their application materials by 11:59 pm in their local time zone on the deadline date. The Common App recommends submitting the application well before 11:59 pm in case there are any last minute complications caused by a technical barrier such as loss of internet connection.

FAFSA Deadlines

When students complete the Free Application for Federal Student Aid (FAFSA), they will be considered for federal student aid. Many states and colleges also use the FAFSA to determine their own financial aid awards for students such as scholarships, grants, and loans. The amount of aid is limited, so meeting the FAFSA deadlines is super important.

The following deadlines are worth remembering:

Federal Deadlines

To be considered for federal student aid for the 2023–2042 award year, you can complete a FAFSA form between October 1, 2022, and 11:59 p.m. Central Time on June 30, 2024. Any FAFSA corrections or updates must be submitted by 11:59 p.m. Central Time on September 14, 2024.

College Deadlines

Each college a student is accepted at may have a different deadline for submitting the FAFSA to their particular financial aid department. Students should double check this deadline for any schools they want to potentially attend.

State Deadlines

Each state has a unique deadline which students can review on the Federal Student Aid website .


💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.

Early Decision Deadlines

When applying for an early decision, the traditional deadline is in November, typically falling on the 1st or the 15th. However, some schools now offer what is called Early Decision II, which offers students a chance to apply for an early decision but at a later date, typically in January. Each school’s dates vary, so it’s a good idea for students to confirm these dates with the schools they are interested in.

Early Action Deadlines

Students applying for early action can expect a deadline of November 1st or November 15th for the most part. As they are applying early, they generally receive an admissions decision early as well. This usually happens in mid-December.

Rolling Admissions Deadlines

Some schools offer more flexibility on their admissions deadlines by offering what is called “rolling admissions.” The difference between a rolling admission process and a deadline based admission process is that colleges with rolling admissions evaluate students’ applications as they are submitted instead of waiting until the official deadline to evaluate all applications at once. These schools evaluate applications as they receive them until they have filled all of their incoming class slots.

A rolling admissions decision essentially allows a student to apply anytime they would like and they have until the school’s decision deadline to choose if they will attend. Typically schools with rolling admissions deadlines have longer admission windows, which gives students time to apply to other schools.

College Decision Day Deadlines

While not all schools set their acceptance deadlines for the College Decision Day date, many schools do. Each year on May 1st is National College Decision Day and on this day students have to make an official decision about which college they will be attending (they can also choose to make their final decision before this date). They have to sign a letter of intent to enroll and typically need to submit a deposit to hold their spot in the incoming class.

College Education Financing Options

Once the college application deadlines for high school seniors pass and the acceptance letters begin to roll in, students and their families may begin to think about how they’ll finance a college education. After reviewing the financial aid package offered by their school, the student will have a better idea of how much they may need to take out in student loans in order to cover the costs of tuition and room and board.

There are two types of student loans: federal and private. Federal student loans can be obtained from the United States government and their terms are set by law. As mentioned, students can apply for federal student aid by filling out the FAFSA annually. Federal loans offer fixed income rates and certain protections, such as income-driven repayment plans.

Private loans, on the other hand, come from private lenders such as credit unions, banks, and online lenders. Terms for private student loans are generally based on the applicant’s (or cosigner’s) credit history, among other factors. Unlike federal loans, private loans don’t come with government-based protections.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.


Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIS0723023

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender