Option selling basics. Cash secured puts, covered calls and credit spreads for income-Option selling is a great way to boost your gains and can be significantly less risky than going long or short stocks and options directly
Selling cash secured puts and covered calls for income Option selling is a great way to boost your gains and can be significantly less risky than going long or short stocks and options directly. When you sell an option you are paid a premium to take a risk. When you sell a PUT you risk having to purchase shares at a given strike. When you sell a CALL you risk having to sell shares at a given strike. Terms to understand Option: Gives the buyer the right to buy or sell 100 shares of a given stock at a given price (strike) and date (expiration). The buyer pays a premium for that right and the seller collects the premium from the buyer. Cash secured put: A put option that you sell to open a trade. On the option expiration date if the stock price is less than your strike you are obligated to buy 100 shares for each sold option at the strike price. It is called "cash secured" because you need to have enough cash in your account to cover the purchase of the shares. Covered call:...