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Questions tagged [put-options]

A put option is a contract giving the owner the right, but not the obligation, to sell–or sell short–a specified amount of an underlying security at a pre-determined price within a specified time frame. Related tags are [call-options, options, options-assignment, option-exercise and should be used when appropriate.

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Wouldn't it always make sense to be an Option Writer (seller)?

I've read multiple times that options are rarely, if ever, exercised, and 90+% usually expire into nothingness. If that's the case, wouldn't you always want to be an option writer? If nobody is ever ...
HappyTurtle's user avatar
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Hedging a long/short equity position with options?

If an individual was considering: LONG 100 AAPL shares at 150 SHORT 100 APPL shares at 150 How could he/she hedge the directional risk with options for those two trades? And what would be the ...
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How can an option seller get out of a contract?

I was recently on Optional Alpha, which provides an overview of how to trade options, from A to Z. During one of the videos/lectures, there was an introduction for: buy to open, sell to close, sell ...
gcat's user avatar
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-1 votes
3 answers
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By pass the 100% limit in shorting: Capitalising on a Market Crash

I want to short a cryptocurrency that is highly overvalued. Let say its current value as of now is $10,000 , my intuition say that sometime next year like Feb its going to fall significantly to about $...
Bob Kimani's user avatar
2 votes
2 answers
671 views

Stock options: payoff diagrams assume European style exercising

Most literature on stock option strategies expresses payoff outcomes in terms of European options -- namely, ones that can only be exercised on the expiration date. See this Iron Condor payoff ...
Zach's user avatar
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Selling Put Contracts

When selling a put option when is the contract fulfilled? Is it at any time between now and the expiration date, or is it only on the expiration date? For example, if I sell 1 put option for Dec 15 (...
jollywg's user avatar
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3 answers
767 views

Options "Collar" strategy vs regular Profit/Loss stops

I just found out about the option "collar" strategy which is implemented with a long put and a short call. My understanding is that a collar limits the profit as well as the loss on the underlying ...
pavel_karoukin's user avatar
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What's wrong with this margin calculation?

I'm calculating margin on put selling options using TDAmeritrade's formula. It can be found here on p.11: https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD086.pdf Using the first example ...
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How to Calculate the Expected Move of a Stock

I've been trying to determine how to calculate the expected move of a stock, and I've found there are several ways to do this but most of my findings usually lead me to this formula: Unfortunately ...
HappyTurtle's user avatar
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4 answers
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Selling To Close

Is it possible to sell to close a call/put option I own for a profit even if the underlying stock price has not exceeded the strike price? If my cost basis is .10 per contract and that same option is ...
SpeculativeTrader87's user avatar
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Is it possible to see option prices from the past?

For example, I can look up what a companies stock price was like in the past, but I can't look up an option chain from the past.
HappyTurtle's user avatar
4 votes
2 answers
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Option trading: High dollar value stock option and equity exposure

Probably an elementary question on options: If I trade options of a high dollar value stock, I will be exposed to higher equity as 1 option = 100 shares. Is there a way to reduce equity exposure? ...
bluetech's user avatar
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How to interpret these explanatory graphs (about option strategies)?

I was reading about different option strategies at TradeKing and although I think I understand how these strategies work, I don't see how they are explained by the accompanied graphs. So just to take ...
SherlockEinstein's user avatar
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Stocks, Options, and Income Tax

It is my understanding that if an investor owns a stock and sells a qualified covered call then dividends from the stock are still qualified. However, if an investor owns a stock and buys a put option ...
Bob's user avatar
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3 votes
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What is the face value of sovereign and Britannia gold coins?

I have seen claims on the internet saying sovereigns have face value of £1 and £100. These coins therefore have an embedded put option at the strike being the face value.
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Put Option Pricing

I'm looking to buy a put option, but I don't understand the pricing. There is a stock X, and it trades at $200 / share. A 1 week put option is priced at $0.75 / option. But to actually make the trade ...
James's user avatar
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Can I buy put options on an ADR?

A stock is listed on Tokyo Stock Exchange. I want to buy put options on it - how can I do that? Or is short selling an ADR my only possibility?
Some Guy's user avatar
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Put on a put option

I am not entirely sure why you would want to do this, but if you believed that a stock would increase in value, but you doubted yourself severely, would it be possible to buy a put option where the ...
nosyarg's user avatar
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Always profitable combination of options strategies?

Why can't we just combine multiple options strategies to get an always profitable scenario? For example by combining protective call and protective put won't we be able to get an always profitable ...
Mike's user avatar
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3 answers
355 views

When a near term outlook on an asset is negative, is it possible to make money using both put and call options?

This question is about Put options. These contracts give the buyer the right to sell some underlying asset at some agreed strike price at or before (American style contract) the expiration date. Call ...
SherlockEinstein's user avatar
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Selling put and call Loss Scenario Examples

I am building selling portfolio for option trading. I can find buying call and put scenario but no scenario for selling and losing side. For e.g. If buyer exercised put option, what happened on ...
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Buying puts without owning underlying

I'm looking to buy puts for short-term option trading. My time horizon is a week to two weeks at most. I only ever trade the options - I never hold to expiration. When I attempt to buy a put, I get an ...
Fueled By Coffee's user avatar
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3 answers
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Types of investments with built-in puts or similar safety features

I recently learned of indexed universal life insurance. One of the features of this type of investment is that a portion of the funds are used for puts, so the investment rarely (never?) loses money ...
Ben's user avatar
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Which option is more expensive?

Consider two European put options, written on the same asset, with the same maturity, but different strike prices: K1< K2 Which option is more expensive? Then Answer the same question, but using ...
Andy's user avatar
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4 answers
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Comparison between buying a stock and selling a naked put

Suppose one wants to invest in company X, whose stock is selling for, say, $100/share. What are the differences in profit potential between buying 100 shares and repeatedly selling a naked put at ...
RussAbbott's user avatar
1 vote
2 answers
851 views

How to record “short premium” in double-entry accounting? [closed]

I write (sell to open) puts on margin for “short premium” on my personal account. The contract note for an opening transaction lists a number of components: • contract number • option symbol • strike ...
αίνιγμα's user avatar
3 votes
1 answer
193 views

Taxes, Puts and the Wash Rule

If an investor sells a stock at a loss and on the next day, he sells a put on the same stock, does the selling of the put trigger the wash rule? Does it matter if the put was sold out of the money? I ...
Bob's user avatar
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How is the time-premium on PUT options calculated

I have some PUT options in AAPL, and I thought I understood how options pricing worked on a basic level but I must be missing something. Today the AAPL stock dropped $3.38, and I expected my PUT ...
Dylan Smith's user avatar
4 votes
8 answers
3k views

Is selling put options an advisable strategy for a retiree to generate stable income?

Suppose a retiree wants to generate stable income from selling S&P500 (or other stock index) put options. Is this an advisable strategy for a retiree?
curious's user avatar
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2 votes
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OTM puts or ITM puts in fear of market crash

If I own some shares, but at the same time I am afraid of a market crash, should I buy OTM puts or ITM puts?
Jonas's user avatar
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1 answer
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Question about margin and investing

Lets say I have $10,000 cash in an account and margin buying power of $20,000. I sell a put that is worth $9,000 and it gets exercised. Will I be using margin since i have enough cash in the account ...
Chris's user avatar
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How does a dividend announcement affect a option straddle position

If I buy an at the money straddle, hoping to profit from a volatility increase, then how does an underlying dividend announcement affect my PnL? I am thinking that if the underlying announces a ...
Victor123's user avatar
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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 ...
Victor123's user avatar
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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 ...
Victor123's user avatar
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2 votes
3 answers
308 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 ...
Victor123's user avatar
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2 votes
1 answer
8k 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?
Victor123's user avatar
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3 answers
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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. ...
Victor123's user avatar
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1 answer
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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 ...
user1151031's user avatar
1 vote
1 answer
574 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 ...
Victor123's user avatar
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1 vote
4 answers
6k 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 ...
Victor123's user avatar
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2 votes
4 answers
941 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 ...
Victor123's user avatar
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6 votes
1 answer
6k 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 ...
Sean W.'s user avatar
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4 answers
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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 "...
alekop's user avatar
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1 answer
401 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 ...
John Shedletsky's user avatar
1 vote
1 answer
277 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?
Victor123's user avatar
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2 answers
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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 ...
Akrasia Lee's user avatar
3 votes
3 answers
1k 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 ...
Victor123's user avatar
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0 votes
2 answers
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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?
4thSpace's user avatar
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7 votes
3 answers
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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. If ...
leeman24's user avatar
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2 votes
1 answer
185 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 ...
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