Selling Put Options Strategy ☝

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Selling put options – the payoff chart. PLEASE LIKE AND SHARE THIS VIDEO SO WE CAN DO MORE! If we’re selling put options, we are effectively selling insurance. If you have a stock in a portfolio you might buy a put option to protect against some kind of disaster in the stock market. To do this you pay a premium for the option and the seller receives the premium. If the even happens the seller pays out. If the event doesn’t have the seller keeps the premium.

Selling Put Options: How to Sell a Put Option

Say XYZ stock price is at $50
You sell 1 x $50 put option at $10. That’s the price of that option.
Let’s see what the value of that put option will be at different time frames.
If the stock price goes to $0. The put now has $50 worth of value. The option owner has the right to sell stock in XYZ at $50.
If the stock price goes to $30 the put option has $20 worth of value.

But we’re the seller of the option…if we’re selling the put how does it affect our profits and losses?
If we’re selling the option we want the stock to go higher.
If the stock goes to $60, the option is worthless and I get to keep the $10.
Same for $50, you keep the $10
If the stock goes down to $40, your profit or loss is net zero.
If the stock price goes to $0, your loss is ($50 – $10) = $40


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