- Options: Calls and Puts - CFA Level 1 - Investopedia
- Put Option Explained | Online Option Trading Guide
- Covered Call Options
- Covered Put / Selling Covered Put by
You would want to employ this strategy only if you think the price of XYZ will not fall below $75 by the April expiration. If XYZ does fall below $75, the short stock trade alone would be more profitable.
Options: Calls and Puts - CFA Level 1 - Investopedia
Although in some ways this strategy resembles a covered call in reverse (for neutral to slightly bearish outlooks on stocks and markets rather than neutral to slightly bullish), that's actually an unnecessarily risky strategy. Bear call spreads are more effective and less risky if you want to trade on a neutral to slightly bearish outlook.
Put Option Explained | Online Option Trading Guide
This strategy is used to arbitrage a put that is overvalued because of its early-exercise feature. The investor simultaneously sells an in-the-money put near its intrinsic value, sells the stock and then invests the proceeds in an instrument earning the overnight interest rate. When the option is exercised, the position liquidates at breakeven, but the investor keeps the interest earned.
Covered Call Options
Covered Put / Selling Covered Put by
Note: While we have covered the use of this strategy with reference to stock options, the covered put is equally applicable using ETF options, index options as well as options on futures.
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In options trading, you may notice the use of certain greek alphabets like delta or gamma when describing risks associated with various positions. They are known as "the greeks".. [Read on.]
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The covered put has increased your cost basis from $85 to $86, in effect giving you a bit of a head start or cushion, depending on how you view it.
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