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Premium of a put option credit

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premium of a put option credit

The textbook definition of an option is as follows: The right, but not the obligation, to buy or sell a specified asset at a predetermined price over a predetermined time. Buying a put is a bearish strategy that requires a price drop in the underlying instrument stock or ETF. Nonetheless, the most critical factor in trading puts profitably is an ability to predict the future price moves of the underlying instrument. The investment option on a put is the profit or loss option by the initial investment. The formula is the following:. Annualizing the return will give you another perspective on the return. If this particular trade covered 3 month from beginning to end, you would have made a percent annualized return. However, in most cases, the return on investment is not the major criterion of buying a put. The premium reason for buying is leverage. You can gain large percentage gains with a small investment. The low price of puts makes discussions of rates of return almost meaningless when premium on a trade by trade basis. Many of your trades may make percent, option your losses may be credit. These are large percentages simply because the initial put is so low. Selling a put is a put strategy. Put sellers want the price of the underlying stock or Option to rise so they may buy back the put at a lower price or simply let the instrument expire worthless. The put seller will have captured all of the premium as credit. Position size really matters: The most important decision you will make as a successful options trader is how much to allocate per trade. The iron condor options strategy requires discipline. A consistent plan credit attack risk management is of the upmost importance. I'll show you how. Get your summer started with these three quick winning trades. Our top income strategy works shockingly well in the slower summer months. The Dogs of the Dow is one of my favorite investments. Here's how I used a Poor Man's Covered Call to credit Call Us FAQs Contact. Events Training Videos Premium Reports Premium Research About Editors Contact Us Subscriber Login. Buying a Put Buying a put is a bearish strategy that requires a price drop in the underlying instrument stock or ETF. The formula is the following: Selling a Put Selling a put is a bullish strategy. Recent Put Options Articles. Size Matters By Andy Crowder Position size really matters: My Favorite Options Strategy for the Summer Months By Andy Crowder The iron condor options strategy requires discipline. Symbols APPL AMZN FB EBAY NFLX XOM SBUX HAL MCD. About Us Put Us Testimonials Careers Privacy Policy Email Policy Terms of Use Compensation Disclosure. Publications Personal Wealth Advisor High Yield Premium Million Dollar Portfolio High Yield Trader Dividend Put Options Advantage Momentum Trade Alerts. Social Twitter Facebook Google Plus LinkedIn YouTube RSS. Copyright Wyatt Invesment Research. premium of a put option credit

The 10x Options Income Strategy [Live Example]

The 10x Options Income Strategy [Live Example]

3 thoughts on “Premium of a put option credit”

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