Put writing is ;ut essential part of options strategies. Selling a put is a strategy where pkt investor writes a put contract, and by selling the contract to the put buyer, the investor has sold the right to sell shares at a specific price. Thus, the put buyer ho has the right to sell shares to the put seller.Selling a put is advantageous to an investor, because he or she will receive the premium in exchange for committing to buy shares at the strike optioh if the contract is exercised.
An option premium may also refer to the current price of any specific option contract that has yet to expire. Making money in any type of market can be an extremely trying proposition. And though the goal of put writing versus call writing is different in a strategic sense, the ultimate goal of increasing your overall gains — along with your overall hoe — is one wirte put option is an option contract in which the holder (buyer) has the right (but not the obligation) wrote sell a specified quantity of a security at a specified price ( strikeprice) within a fixed period of time (until its expiration).For the writer (seller) of a put option, it represents an obligation writr buy theunderlying security at the strike price if how do you write a put option premium option is exercised.
The put option writer is paid a premium for taking on the risk associated with the obligation.For stock options, each contract covers 100 shares. Note: This article is all about put options for traditional stock options. If you are looking for information pertaining to put pre,ium as used in binary option trading, please read our writeup on binary put options instead as there are significant difference between the two.
Buying Put OptionsPut buying is the simplest way to trade put options. When the optioIf you are very bullish on a particular stock for the long term and is looking topurchase the stock but feels that it wwrite slightly how do you write a put option premium at the moment, thenyou may want to consider writing put options on thestock as a means to acquire it at a discount.So, instead of entering a limit order to purchase the stock, you can write an equivalentamount of near-month slightly out-of-the-moneynaked puts with a strike price that is equal tothe target price at which you wish to purchase theunderlying stock.Thereafter, on expiration date, if the stockprice and your sentiments towards the underlying stock remains unchanged, the putsthat you sold will expire worthless.
This lets you pocket thepremiums received and write some more put options.Should the stock price take a dive and goes below the put strike price, you caneither follow through with your obligation and pickup the stock or you can buy bBetter Together. Never miss a trending story with yahoo.comas your homepage. Every new tab displays beautiful Flickr photos and your most recently visited sites. This means the only stamp duty payable until the contract comes into existence (ie after the exercise of either one or both options), is neg.