Selling Put options
Selling naked puts can definately be a powerful method of making money in the stock market. It is the only thing that I know of which will actually pay you for getting into a stock.
So, what is a put option? A put option gives the buyer the right to sell a stock at a certain price on or before a given date. Option buyers would buy a put if they believe that the stock is going to go down and wanted to profit from it, or wanted t protect their positions from the loss.
However there are two sides to this coin. It can help an investor get into a strong stock that they really like and get paid to do so as well. When an investor sells a put they are obligating themselves to buy the stock if it comes down to that point, but they also get paid.
For example if an investor likes stock ABC which is trading at $43 and they sell the $45 put for say $6 they get paid $6 up front, and as long as the stock does not go above $45 before the option expires they will get called out and have to buy the stock for $45.
Selling put options can be a little bit riskier then just going out and buying the stock because you may not actually end up owning the stock if it goes above $45. However they would have still made money by selling the put so it would not have been a total loss. If you sold a put and did end up buying it, you could always sell another put and keep that gravy trail rolling.
Selling puts can be a very popular method of making some extra money from the stock market. Puts can be very powerful if you sell them on dividend paying stocks with great fundamentals.
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