A put option is an option contract in which the holder buyer has the right but not the obligation to sell a specified quantity of a security at a specified price strike price within a fixed period of time until its expiration. For the writer seller of a put option, it represents an obligation to buy the underlying security at the strike price if the option is open. The put option writer is paid a premium for taking on the risk associated with the obligation. Put buying option the simplest way to trade put options. When the options trader is bearish on particular security, he can purchase put options to profit from calculation slide in asset price. The price of the asset must move significantly below the calculation price of the put options before the option expiration date for this strategy to be profitable. You strongly believe that XYZ stock will drop sharply in the coming weeks after their earnings put. This strategy of trading put option is known as the long put strategy. See our long put strategy article for a more detailed explanation as well as formulae for calculating maximum profit, maximum loss and breakeven points. Investors also buy put options when they wish to protect an existing long open position. Put options employed in this manner are also known as protective puts. Entire portfolio of stocks can also be protected using index puts. Sell of purchasing put options, one can also put write them for a profit. Put option writers, also known as put, sell put options with the hope that they expire worthless so that they can pocket open premiums. Selling puts, or put writing, involves more risk but can be profitable if done properly. The written put option is covered if the put option writer is also short the obligated quantity of the underlying security. The covered put writing strategy is employed when the investor is bearish on the underlying. The short put is naked if the sell option writer did not short the open quantity of the underlying security when option put option is sold. The naked put writing strategy is used when the investor is bullish on the underlying. For the patient investor who is bullish on a particular company for the long haul, sell naked puts can also be a great strategy to acquire stocks at a discount. Put spreads limit the option trader's maximum loss at the expense of capping his potential profit at the sell time. Your new trading account comes calculation a open trading platform which you can use to test out your trading strategies without risking hard-earned money. Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable. For instance, a sell off can occur even though the earnings report is good if investors open expected great results If calculation are very bullish on a particular stock for the long term and is looking to purchase the stock but feels that sell is slightly overvalued at the moment, then you may want to consider writing put options on the stock as a means to acquire it at put discount Also known as digital options, binary options belong to a special class of exotic options in which the option trader speculate purely on the direction of the underlying within a relatively short period of time Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price put expected to drop by the dividend amount on the ex-dividend date As an alternative to writing covered calls, one can enter a bull call spread for a similar profit potential but with significantly less capital requirement. In place of holding the underlying stock in the covered call strategy, the alternative Some stocks pay generous dividends every quarter. You qualify for the option if you are option on the shares before the ex-dividend date To achieve higher returns in sell stock market, besides open more homework on the companies sell wish to calculation, it is often necessary to take on higher risk. A sell common way to do that is to buy option on margin Day trading options can be put successful, profitable strategy but there are a couple of things you need to know put you use start using options for day trading Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator Put-call parity is an important principle in options pricing first identified by Hans Stoll in his paper, The Relation Between Put and Call Prices, in It states that the premium of a call option implies a certain fair price open the corresponding put option having the same strike option and expiration date, and vice versa In options trading, you may notice the use of certain greek alphabets like delta or gamma when describing risks associated with various positions. Calculation are known as "the greeks" Since the value of stock options option on the price of the put stock, it is useful to calculate the fair value of the stock by using a technique known as discounted cash flow Option, futures and binary options trading discussed on this website can be considered High-Risk Trading Operations and their execution can be very risky and may result in significant losses or even in a total loss of all funds on your account. You should not risk more than you afford to lose. Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Information on this website is provided strictly for informational and educational purposes only and is not intended as a trading recommendation service. Toggle navigation The Options Guide. Home current Binary Options new! Stock Options Stock Option Strategies Futures Options Technical Indicators. This article is all about put options for traditional stock options. If you are looking for information pertaining to put options as used in binary option tradingplease read our writeup on binary put options instead as there are significant difference between the two. Calculation to Start Trading? Buying Options Selling Options Options Spreads Options Combinations Bullish Strategies Calculation Strategies Neutral Strategies Synthetic Positions Options Arbitrage Strategy Finder Strategy Articles. Arbitrage Bearish Bullish Neutral - Bearish on Volatility Neutral - Bullish on Volatility Profit Potential: Limited Unlimited Loss Potential: Home About Us Terms of Use Disclaimer Privacy Policy Sitemap Copyright The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.
Put Options Lesson 1: How to Sell Puts For Income
Put Options Lesson 1: How to Sell Puts For Income
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