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Buy put options on falling stocks. Put options rise in price when the underlying stock falls in price, and this basic option strategy gives the put owner the ability to multiply their money over ...
However, in October, two analysts recommended selling, six rated the stock a “buy” or “strong buy” and 11 rated it a “hold” (seven) or “underperform” (four).
4. High Gross Monthly Premiums and Sources of Return. On average, selling the at-the-money put option each month earned a premium of 1.65% of the notional value of the index, which averaged 19.8% per year. The income return of 19.8% exceeds the total return of 10.3%, as a portion of premiums are paid to insure losses of the put buyers.
Payoffs from a short put position, equivalent to that of a covered call Payoffs from a short call position, equivalent to that of a covered put. A covered option is a financial transaction in which the holder of securities sells (or "writes") a type of financial options contract known as a "call" or a "put" against stock that they own or are shorting.
In their most basic form, a call option gives you the right to buy 100 shares of an underlying stock at a given price by a given date, while buying a put option works in the opposite manner: You ...
Naked Put Potential Return = (put option price) / (stock strike price - put option price) For example, for a put option sold for $2 with a strike price of $50 against stock LMN the potential return for the naked put would be: Naked Put Potential Return = 2/(50.0-2)= 4.2% The break-even point is the stock strike price minus the put option price.
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