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2answers
72 views

When does it make sense to early exercise a deep in the money put option

I understand the logic for call options. When dividends exceed the time value left, then it is profitable to early exercise a call. But the same does not hold for a put. So, when to early exercise a ...
0
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2answers
52 views

What strike to choose if I want to sell weekly calls against a long LEAP put

I am looking at this strategy of selling weekly calls against long LEAP put options The strategy seems good to me. Quite an improvement over the regular collar strategy. What I do not get is why ...
0
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2answers
54 views

How to hedge a long stock position that does not have options

I am sometimes tempted by the juicy dividends of some Canadian stocks because dividends are taxed favorably by CRA. One such company is RSI Problem is, I would like to protect the long position from ...
2
votes
1answer
52 views

Can I exercise my put if a company goes bankrupt?

If I purchase a stock and a protective put, and the company goes bankrupt, can I still sell my stock at the strike price of the put?
0
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0answers
92 views

Is it a safe strategy to protect a high dividend stock with a collar?

I want to find a few high dividend paying stocks (~10% yield) for my tax sheltered portfolios. I also want the stock to be reasonably safe. I am looking at this list. Problem is, I don't know how to ...
0
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3answers
55 views

Dividend arbitrage using in the money puts

I was looking at dividend arbitrage It seems all I need to do is find stocks with a nice dividend(e.g KO). Then find an in the money put where the time premium is less than the dividend to be paid. ...
0
votes
1answer
29 views

Understanding Put Options

I would like to verify that I have a correct understanding of hedging using a put option contract. For stock XYZ, the current price is $12.50. When I look at the options trading table, it appears ...
0
votes
1answer
19 views

Understanding the synthetic long put option

I am having trouble understanding the following synthetic relationship: Synthetic long put option = Short underlying + long call Now, if XYZ is at 40, and I short XYZ at 40 and also purchase the ...
0
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3answers
75 views

If the put is more expensive than the call, what does it mean

If an At the money Put trades for much higher than the ATM call, can we say that people are expecting the stock to move down? After all, what else could be the reason if the put is more expensive ...
0
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1answer
123 views

Is a naked put really that risky

The word 'naked' in relation to options is synonymous with unlimited risk. But 'naked' puts are limited risk, the risk is limited to the strike price. So , why is it classified in the same category by ...
4
votes
1answer
213 views

How to record a written put option in double-entry accounting?

I have been using double-entry accounting to carefully track my financial situation for a couple of years now, but I am just dabbling with stock options for the first time. I wrote a put option (sold ...
0
votes
3answers
93 views

If a put seller closes early, what happens to the buyer?

If an investor buys a put option to protect their long position, but the seller closes the position before expiration (if it gets close to being in the money), does that eliminate the buyer's ...
0
votes
0answers
42 views

Choosing a strike price when you sell a short combo

Often different stocks that I want to short are not on my broker's "easy-to-borrow" list, so they are unavailable for shorting. A couple weeks ago I got serious about option trading and I found out ...
1
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1answer
46 views

Covered call vs naked put in online brokerages

If a covered call has same risk profile as naked put, how come brokers allow covered call but only allow naked puts to experienced traders?
0
votes
1answer
28 views

Covered call and put options as separate trades

Let's say I write a covered call and a buy separate put option. After a period of time, the call expires, leaving me with the underlying stock. Thereafter, the market price went down and I can ...
2
votes
2answers
64 views

Exercise a put option when shorting is not possible

Sometimes when I want to short a stock, my broker says that no shares are available for borrowing. In this situation, can I buy a put and exercise it immediately and end up with a short position? in ...
0
votes
2answers
74 views

Value of put if underlying stays below strike?

If ABC stock is trading at $5 and I buy the Jan 15 strike put for $8.25, what happens to the value of this put at expiration if ABC only meandered between $5 to $7 during the entire period?
0
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0answers
44 views

Options contract calculator - for non-equities

All of my options calculators are within stock trading platforms, or readily found on the internet and require stock/index symbols. I am trading illiquid options over the counter, on an asset. I have ...
7
votes
3answers
1k views

Am I understanding buying options on stock correctly

I'm just wondering if I am understanding Stock options correctly. Basically if I am watching stock XYZ. It's currently at $10 per share which I believe is low and should raise to 20 within 1 month. ...
2
votes
1answer
54 views

Why don't options chain prices vary smoothly?

I'm looking at options chains for SPY for some particular expiry date. I'd expect that the last trade prices would vary smoothly with the strike price. But they don't; there are occasional puts that ...
2
votes
3answers
104 views

Why does a long/purchased call option have a long position in the option itself?

I am teaching myself some finance through a book. And I get confused by call/put options having short/long position in the options themselves or the underlying assets. For example, I understand the ...
1
vote
4answers
335 views

How do you go about exercising a put option with less than 100 shares?

I've 50 shares of a company and I'm wanting to leverage that with a put option (Buy to Open, with the expectation share price might drop). When the prices is right and I want to exercise the ...
1
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2answers
74 views

Do I have to pay MLP distribution if short via option?

If I sell a naked put on VLP, do I have to pay the partnership distribution if I'm holding the option when the distribution is declared?
-2
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1answer
74 views

A basic put option example

If I buy 100 shares of XYZ at 18$ and a put option with one month to go at a strike of 19$ for 45 cents, then my total expense is 1845$ . Now do I have a guaranteed profit of 1900 - 1845 = 55 $ in a ...
-1
votes
1answer
317 views

Difference between naked put, covered put, protective put

If I buy a long put without holding the underlying, does it amount to a naked put? If I hold the underlying and buy a put, is that a covered put? Also if I hold the underlying and sell a put, is that ...
7
votes
3answers
740 views

How does one typically exit (close out) a large, in-the-money long put option position?

I'm long some puts on a stock that has dropped a great deal. I've made $400,000 on an investment of $100,000. The question is, how do I exit? I can't really sell the puts because there isn't enough ...
5
votes
1answer
635 views

Options: Letting it expire or sell when profiting?

Do you let your options expire or would you sell it before you let it expire if you're profiting (meaning you're in the green - market is going towards the correct direction you anticipated). If you ...
0
votes
1answer
136 views

Put-Call parity - what is the difference between the two representations?

I have seen these two terms for put-call parity: S + P = C +Ke^(-rT) S + P = C + K/(1+r)^T Which one is the correct formula? When to use each of them? What is the diffrence?
3
votes
2answers
218 views

Can you write a put option without sufficient funds to meet the potential obligation?

When writing a put option does your account have to be funded so that if the buyer exercises the right to sell you can meet your obligation, or can you write the put option without the funds to meet ...
3
votes
3answers
335 views

Options strategy - When stocks go opposite of your purchase?

I'm a bit new to options and would like to ask for someone's strategy opinion. Lets say that you buy a call at an expiration date 2 months or so from now, and in a few days you see the stock go flat ...
2
votes
2answers
4k views

Difference between Black-Scholes, Binomial models and Market price in European index options?

Need some help! I have calculated the theoretical price of an index option using BS and Binomial models and are now comparing the three. While BS and Binomial have approximately the same value, ...
2
votes
1answer
96 views

Can you help identify/name this equity options strategy?

I am thinking of making such a trade: BUY PUT $590 MARCH WRITE PUT $600 APRIL I have done some reading and it looks like a diagonal put spread, but the diagonal put spread uses an ...
2
votes
2answers
5k views

Difference between European and American options

Appreciate some help with a problem i am facing OK, so first I found a put and call option with same strike price and maturity for both American-style and European-style options. I selected the ones ...
2
votes
3answers
452 views

Why do put option prices go higher when the underlying stock tanks (drops)?

Why do higher and lower strike prices for options all go up when a stock tanks? I am looking at Apple today (as an example), and with it down $8 today and currently at $376, why would the October ...
1
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3answers
96 views

When trading put options, is your total risk decreased if you are in a position to exercise the option?

I've been trying to work this out for a while: Say I own stock X right now trading at $250. If I were to buy a put option on stock X and I pay $5 for the option to sell at $250, If the stock ends ...
3
votes
3answers
1k views

Do stock option prices predicate the underlying stock's movement?

I am trying to understand if my thinking is correct or not. I am looking at a stock that is @ $10.00. When I look at the options on the stock $11, $12... calls are all down today and $11, $12... ...
5
votes
1answer
344 views

Options for the intelligent but inexperienced

(Related to "Options for Dummies" and "What are some good options strategies...") I've been an investor in stocks for the past 14 years and have the confidence that I know what I'm doing. (Not that I ...
5
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2answers
312 views

Can a put option and call option be exercised for the same stock with different strike prices?

Refer to http://finance.yahoo.com/q/os?s=PEI&m=2011-10-21 If I were to sell a call @ 15 and sell a put @ 13, come October 21, is it possible for BOTH of the options sold to be exercised?
4
votes
3answers
140 views

Can I profit from selling a PUT on BBY?

http://www.google.com/finance/option_chain?q=NYSE:BBY If I sell a Put at a $28 strike price, I'll earn $0.26/share (times 100 for one contract) = $26 today, correct? And as long as BBY doesn't drop ...
3
votes
1answer
199 views

Funneling money from a Traditional IRA to a Roth IRA using Options: Is my method possible and tax legal?

I'm new IRAs and I have both a traditional and Roth. My plan is to buy stocks in the IRA and buy protective puts in the Roth that guaranty a maximum risk of 5% or less across both accounts. I expect ...
7
votes
2answers
416 views

What does this statement regarding put options mean?

I read an article in the NY Times, but I don't understand what this statement means: “The 16 puts on Cisco are offered at 71 cents. We should buy 1,000,” he says to a trader sitting across the ...
1
vote
1answer
75 views

Protecting Gains: Buying a Put vs. Leveraged Bear Market vs. Liquidating Long Positions?

I am a long investor looking to protect some of my gains in the recent market rally. What are my options? I know of 3 possibilities: Buying a Put (in say SPY) Leveraged Bear Market (say QID) ...
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10answers
23k views

Options for dummies. Can you explain how puts & calls work, simply?

I never understood Puts or Calls. Could anybody explain it like I were a child?
6
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3answers
2k views

Why won't my retirement account let me write a “covered put”?

My retirement account (a traditional IRA) will let me write a covered call, where I sell a call option if I have the underlying securities (for instance, 100 shares of IBM). The shares are required to ...
4
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3answers
4k views

How do you calculate the rate of return (ROR) when buying and selling put options?

How do you calculate the rate of return (ROR) when buying and selling put options?
13
votes
2answers
961 views

How can put options be used to buy shares at a lower price?

How to use puts, if you are a net buyer of stocks? I read an article about Warren Buffet buying Burlington Northern stocks and how he used puts to lower the buying price of the shares. Please, ...