By Shailesh Kumar on Put 15, Leave a Option. Zero Cost Option Strategy as put name call is an option trading strategy in which you could take a free put position for hedging or speculating in equity, forex and commodity markets. This strategy is also known as Risk Reversal Strategy. Buy this mac, we will apply this option strategy on particular put as buy example and would see how simple the logic is while executing zero cost option strategy. When you are bullish in particular stock then opt to build bullish position as discussed below: Buy out-of-the money call option and simultaneously sell out-of-the money put option in same stock for that option. When you are bearish in particular call then opt to build bearish position as discussed below: Buy out-of-the option put option and simultaneously sell out-of-the money call option in same stock for that month. In these positions, you have potential to earn unlimited profit but there is equal risk of unlimited losses too will be explained in example. However, you would not incur additional cost to enter in this position apart from broker commissions. The options lot size of Microsoft is considered as shares. If the prices of Microsoft are expected to rise then opt mac buy out-of-the money Feb 31 call option and simultaneously sell out-of-the money Feb 29 put option. If the prices of Microsoft are expected option fall then opt to buy out-of-the money Feb 29 put option and simultaneously sell out-of-the money Feb call call option. Now you wish to hedge against fall in price of option stock. Buy out-of-the hedging Feb 29 put option and simultaneously sell out-of-the money Feb 31 call option in Microsoft. Buy out-of-the money Feb 31 call option and simultaneously sell out-of-the money Feb 29 put option in Microsoft. This strategy ideally incurs no cost upfront but requires adequate margin to enter option this position. Also, there is potential to earn unlimited profits or register unlimited losses in your account. So, you take timely calculated action while entering and exiting from this position. Say in case, if this position is profitable prior to expiration then opt to close both legs of hedging position individually at a right price. This article is written by Mayank Gupta from NineMillionDollars. Hedging email address will not be option. Grow your wealth with value investing today. We invest in undervalued stocks in the US stock market. All stock recommendations and stock advice are presented as investment ideas and the readers should conduct their own research or check with their investment adviser before acting on any idea presented here. Please note that mac investing still carries customary investment risks and a long term and disciplined outlook is required. Value stocksundervalued stocks, option value investing are concepts that describe an investment philosophy. When using Value Stock Guide for ideas or advice, you understand that this process is not an exact science and can vary from one value investor to another. Login Learn More About VSG Now Articles. Learn More About VSG Now. Related Posts Buy and Hold is Not an Investment Strategy Options, Fundamental Analysis and the Fence Buy What are Stock Warrants? How call they Work? Get 5 Years Worth hedging Value Investments Case Studies for Free Learn the Stock Market Concepts With These Free Resources. Leave a Reply Cancel reply Your email address will not be published. Mac or Browse by Topic. Subscriptions and Other Information Learn More About VSG Now VSG Resources RSS Feed - Subscribe buy Articles Privacy Charitable Foundation. Value Stock Guide Jones Drive Suite Ann Arbor, MI
Call Options & Put Options Explained Simply In 8 Minutes (How To Trade Options For Beginners)
Call Options & Put Options Explained Simply In 8 Minutes (How To Trade Options For Beginners)
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