Selling a put option contract cost


The sale of put options can be an excellent way to gain exposure to a stock on which you are bullish with the added benefit of potentially owning the stock at a future date at a price below the current market price. To understand how selling puts may benefit your investment strategy, a quick primer on options may be helpful to some.TUTORIAL: Options BasicsCall Options Vs. Put OptionsVery simply, an equity option is a derivative security that acquires its value from the underlying stock it covers.

Owning a call option gives you the right to buy a stock at a predetermined price, known as the option exercise price. A:The incorporation of options into all types of investment strategies has quickly grown in popularity among individual investors. For beginner traders, one of the main questions that arises is why traders would wish to sell options rather than to buy them. The selling of options confuses many investors because the obligations, risks and payoffs involved are different from those of the standard long option.To understand why an investor would choose to sell an option, you must first understand what type of option it is that he or she is selling, and what kind of payoff he or she is expecting to make when the price of the underlying moves in the desired direction.Selling a put This article needs additional citations for verification.

Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2015) ( Learn how and when to remove this template message)In finance, a put or put option is a stock market device which gives the owner of a put the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).

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Cost option a selling contract put

Selling a put option contract cost