New answers tagged put-options
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In the US, if an option is one cent or more in-the-money (ITM) at expiration, the Option Clearing Corp (OCC) will automatically exercise options whether they are long or short. This is called Exercise by Exception. For equity options, you will end up with a long or short position in the underlying (index options are cash settled).
If you are long the option,...
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The option will certainly be exercised. The $10 cost is already lost to buy the option. Now the person who bought the option has the right to sell an $85 stock to you for $90. They'll certainly do that. That will allow them to make back part of the fee they paid for the option, so they'll end up down just $5 instead of the full $10.
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Your understanding of this is incorrect. A put has a negative delta. Selling a put means that you are long delta - you are going to BUY shares if assigned. Long stock has a positive delta so there is no hedge here. So no, If the put gets exercised you CANNOT use the underlying long shares to offset. They are additive not offsetting.
All directional ...
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A short put means that you have the obligation to purchase the underlying at the strike price of the contract or $90 in your example. If assigned, your cost basis is $90 less the premium received ($2.75) or $87.25
If the purpose of selling the put is to acquire the stock at $87.25 then there's nothing to do. Either the put expires and you keep $2.75 or ...
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Options are always executed at the strike price. Since the strike of your hypothetical option is $90, that's what you'd buy the stock for. The price of the stock at the time the option was written is irrelevant.
Note that you wouldn't necessarily lose $9,000 - you'd buy the stock for $90 and could turn around and sell them for $90 (the current market price) ...
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AFAIC, the only reason that an investor should sell a standalone short put is to acquire shares at a better price. OK, check that box ---> you want more shares at a lower price.
What I'm considering is selling PUTs at 350, expiry in 150 days, or even 300 days. From what I've read they're most likely to expire as whoever bought them would just sell them ...
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Think about what happens if TSLA is at 250 in 150 days. Or 200. Or 150. You instantly lose $100/share. Or $150. Or $200. Yes, that can happen if you buy the stock now, but you have control of how much you can lose (by selling before you lose too much). With a short put, your only option is to buy-to-close, which puts you at the mercy of the option market.
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The investor thinks that stock will drop to 300 but would be willing to buy at 300 so the investor wants to begin writing put options for the option-premium income ?
That's a very good plan except for the possibility that a company with a large amount of debt could go bankrupt if a severe recession were to occur. Then one technique for taking a position in ...
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USAC options are normally fairly illiquid. You can see that from the low open interest. That's even more pronounced in strikes near current price.
Price has dropped maybe 75% in the past month so it's been at it's current price (under $4) for only a short time and not much option trading has occurred at current strikes. When price gets that low, a ...
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At the end of the trading day, traders pull their offers and the bid and ask price for securities widens. With options, this often goes to the extreme and the bid price drops to zero. This is a common every day occurrence.
However, trading in RCL was indeed halted yesterday morning between 9:54:05 AM to 09:59:26 so option trading was also halted at that ...
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