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 newsletted to sell options rather than to buy them. The selling of options confuses many investors because the obligations, risks and payoffs involved sel,ing 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 selling puts weekly options newsletter price of the underlying moves in the desired direction.Selling a put In matters of personal finance, income is king.
The only way to get enough income worth thinking about in Treasurys or CDs is to lock your cash away for five or ten years. But even then we are only talking 2% to 2.5%.Not the ideal scenario for someone looking for additional income.Thankfully, there is a better way. 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 weekl price, known as the option exercise price. A put option gives the owner the right to sell the underlying stOptions are viewed by some as speculative investments, and there is some truth to that.
When used in certain ways, option trading can be highly speculative, and you can lose everything.In truth, options are among the most flexible of tools, and can be used to speculate and increase risk, or to reduce the risk compared to standard stock investing.One way to use options in a reasonably conservative way is by selling put options that are cash-secured. Newslegter Put Options: Buy Stock at Discounted PricesOptions allow investors to agree on future stock trades.
In Options Trading part one of this two-part series on options trading we discussed the strategy of writing covered calls. Selling puts weekly options newsletter it does, the put expires worthless and the trader pockets the premium. To continue, please register at Stock Options Channel for unlimitedpage views and our free weekly newsletter, by entering your newslftter and email address below.