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Put option: A put option gives its buyer the right, but not the obligation, to sell a stock at the strike price prior to the expiration date. When you buy a call or put option, you pay a premium ...
Generally, investors who buy put options expect the actual price of the stock on the market to be lower than their options price so that they maintain the right to sell at above market value.
The seller's potential loss on a naked put can be substantial. If the stock falls all the way to zero (bankruptcy), his loss is equal to the strike price (at which he must buy the stock to cover the option) minus the premium received. The potential upside is the premium received when selling the option: if the stock price is above the strike ...
The post 6 Stock Option Trading Strategies to Consider appeared first on SmartReads by SmartAsset. ... Pairs buying and selling of calls or puts on same expiration but different strikes. Often ...
Selling a naked option could also be used as an alternative to using a limit order or stop order to open an equity position. Instead of buying an underlying stock outright, one with sufficient cash could sell a put option, receive the premium, and then buy the stock if its price drops to or below the strike price at assignment or expiration ...
By selling the option early in that situation, the trader can realise an immediate profit. Alternatively, the trader can exercise the option – for example, if there is no secondary market for the options – and then sell the stock, realising a profit. A trader would make a profit if the spot price of the shares rises by more than the premium.
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