Short put diagram. Let's look at the profit/loss diagram to graphically parallel selling the $97 strike put compared to buying the stock. The blue line represents the profit or loss of a stock-only position, and assumes you buy the stock at $ per share. The red line represents the profit or loss of a short put position. If the stock is below $97 at the.

Short put diagram

How to Make a Basic Shot Put, Hammer, and Discus Circle

Short put diagram. Max Profit = Net Premium Received - Commissions Paid; Max Profit Achieved When Price of Underlying Short Put OR Price of Underlying >= Strike Price of Higher Strike Short Put. Short Put Butterfly Payoff Diagram. Graph showing the expected profit or loss for the short put butterfly option.

Short put diagram


A short put is a type of strategy regarding the selling of a put option. The option itself is a security in its own right, as it can be purchased and sold. If an investor writes a put option, the investor is obligated to purchase shares of the underlying stock if the put option holder exercises the option, or if the option expires in the money.

A short put position is effectively a form of insurance, guarding the investor against losses beyond a certain point. The higher the price rises, the more money the investor makes. The upper bound on the losses is the value of the stock. When an investor enters into a short put strategy, he is locking the price of an underlying security at the strike price and keeping the premium for writing the put option.

Entering into a short put position is considered a risky strategy because an investor is bound by a profit limited to the premium received for selling the put option. However, he is exposed to a higher potential loss only bounded by the strike price of the naked put option minus the premium received, because the underlying stock price can only go to zero. However, the investor does not have enough cash to purchase the underlying stock. To understand the basics of selling put options, see " Introduction to Put Writing.

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Become a day trader. What is a 'Short Put' A short put is a type of strategy regarding the selling of a put option. Short Put Mechanics A short put position is effectively a form of insurance, guarding the investor against losses beyond a certain point.

Risk When an investor enters into a short put strategy, he is locking the price of an underlying security at the strike price and keeping the premium for writing the put option.

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