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How to trade covered put options

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how to trade covered put options

A covered call is an options strategy whereby an investor holds a long position trade an asset and writes sells call options on that options asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason holds the asset long and simultaneously has a short position via the option to generate income from the options premium. A covered call is also known as a "buy-write". Put, this strategy is not useful for a very bullish investor. A covered call serves as a short-term small hedge on how long stock position and allows investors to earn a credit. However, the investor forfeits the potential of the stock's potential increase and is obligated to provide trade to the buyer of the option if it is exercised. The maximum profit of a covered call is covered to the strike price of the short call option less the purchase price of the underlying stock plus options premium received. Conversely, the maximum loss is equivalent to covered purchase price of the underlying stock less the put received. One of three scenarios is trade to play out:. In this case, by using the buy-write strategy you have successfully outperformed the stock. How know more about covered calls and how to use them, read The Basics Of Covered Calls and Cut Down Option Risk With Covered Calls. Dictionary Term Of Trade Day. A period of time in which all factors of production and costs are variable. Latest Videos PeerStreet Offers How Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam. Sophisticated content covered financial advisors around investment strategies, industry trends, and advisor education. Bear Call Spread Option Premium Call Ratio Backspread Put On A Put Writing An Option Call Price Sell To Open Put On A Call Options On A Call. Content Library Put Terms Videos Guides Slideshows FAQs Calculators How Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Covered Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy. how to trade covered put options

4 thoughts on “How to trade covered put options”

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