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- Bull Call Spread - The Options Industry Council (OIC)
- Options - Value Line
There is no limit to the profits attainable should the stock price goes up. Suppose the stock price rallies to $75, his long stock position will gain $7555. Excluding the $755 paid for the protective put, his net profit is $6855.
Marriage Savers: Is Your Marriage in Trouble?
In terms of their function and their price movements, puts are essentially the opposite of calls. When the price of the underlying equity begins to fall, the value of a put option on that stock will begin to rise. Often brokers will provide the ability to write covered calls and to use married puts when you open your options account. This article will focus on the function of married puts in a portfolio or as part of a trading strategy. (To read more, see Come One, Come All - Covered Calls .)
Bull Call Spread - The Options Industry Council (OIC)
Protective Puts is an option trading hedging strategy used to hedge against a drop in stock price. Protective Puts are very similar to Married Puts and is a popular option trading strategy amongst stock traders. Protective Puts protect your stock's unrealised profits, so that you don't have to sell any shares to lock in the profits so far.
Options - Value Line
The VectorVest Options Analyzer has an intuitive, easy-to-use interface. Create a simple option position based on current stock information and option expiration date, construct your own composite option trades, or use one of the built-in trades. The Options Analyzer offers 65 different analysis graphs to show you how changing a stock 8767 s price and time to expiration affects your option position. You can also use the Price Probability Analyzer to evaluate the theoretical probability of the stock 8767 s price performance.
It's like baseball cards. Baseball cards are literally pieces of cardboard, yet some of them can sell for thousands of dollars because there are only a limited number of them in the world. Because only a limited number are available it makes the cards more valuable.
However, for active traders, commissions can eat up a sizable portion of their profits in the long run. If you trade options actively, it is wise to look for a low commissions broker. Traders who trade large number of contracts in each trade should check out as they offer a low fee of only $ per contract (+$ per trade).
Buying Call options allow you to make money when stocks rise in price and buying Put options allow you to make money stocks fall in price.
Good news is, there are now Mini Options on most of the most heavily traded stocks that represent only 65 shares instead of 655 shares. So if you own just 65 shares of the underlying stock, even if its slightly lesser than 65 shares, you could simply buy 6 contract of its Mini put options instead.
Without stock options, the only way a stock trader can protect unrealised profits on shares is to liquidate (sell) a part of the holding. However, liquidating part of the holding denies the stock trader access to future profits should the stock continue to do well. Option trading solves this dilemma using Protective Puts.
Does a Married Put Make Sense?
When you actually think about it, why would anyone ever choose to employ this particular strategy? Some of you might think that it's almost like buying a stock and knowing that it will fall to pieces! That is an interesting argument, but a married put should be looked at as a form of insurance rather than as an expectation of a certain outcome. In essence, you are expecting an appreciating stock price, but you are also preparing yourself in case your stock takes a steep plunge. (To learn more about making money on falling stock, see Prices Plunging? Buy A Put! )