A put option (usually just called a "put") is a financial contract between two parties, the writer (seller) and the buyer of the option. The buyer acquires a short position with the right, but not the obligation, to sell the underlying instrument at an agreed-upon price (the strike price). If the buyer exercises his right to sell the option, the seller is obliged to buy it at … [Read more...]
Short Call -Option Trading
You short a call when you write (sell) a call that you don't currently own. There are two basic types of short calls covered and uncovered (naked). The investor writing Call options should firmly believe that XYZ is not going up! XYZ doesn't have to go down, but it most definitely cannot go up. This is because the strategy's break-even point at expiration is a certain distance … [Read more...]
Protective Put Option – Option Trading
A put option purchased for an underlying security that is already owned by the holder of the option. A protective put defends against a drop in the share price of the underlying security. A protective put strategy is usually employed when the options trader is still bullish on a stock he already owns but wary of uncertainties in the near term. It is used as a means to protect … [Read more...]
Long Call Option : Option Trading
The long call option strategy is the most basic option trading strategy whereby the options trader buy call options with the belief that the price of the underlying security will rise significantly beyond the strike price before the option expiration date. Unlimited Profit Potential Since they can be no limit as to how high the stock price can be at expiration date, … [Read more...]
Dangers of naked puts
What a naked put option is? A put option gives the buyer the right to sell a given stock at a given price on or before a given date. It also gives the seller the obligation to buy the stock at the given price on or before the given date.Naked puts can be extremely dangerous strategies that can make one lose all of their money in the market in a very short time. However … [Read more...]