I get 360 in premium from selling a put It only costs 373 to buy JMBA.. There's over a 90% chance for me to break even
dude if you SELL a put you will be forced to buy the stock at the strike price. The Original Post said buy the stock and sell the put which would be like leveraging a bullish position. You better hope the stock goes up or you'll be assigned more stock. Come to think of it, your broker probably won't even let you do this trade since you're writing the puts naked.
The most I can lose is 200$ per contract, and that's if the stock plummets. Take a look at this stock. You would be aggressive too. It's not a naked put if I own the stock...
I can see a use for this strategy........buying stock and selling puts. but only if you strongly feel a stock will be stagnant until the put expiration date. Longterm, this is a suicide. Short-term, if you get lucky and nabs your put option, why not?
Selling an option - you accept an obligation. If the stock were to drop to zero. You will be obligated to $750 for your short Put. Your stock value would drop $373. That's $1123. of risk. . . . You are not hedged. This doesn't include your other costs. Read, Study, Learn - you will soon find out that you have not invented anything new.
Next time scroll to the far left on your trade/risk calculator in Optionsxpress. Your total potential loss on this transaction if the stock drops to 0.00 is $1,123, less the premium received of $363(excluding commissions), which amounts to a net loss of about $760. If the stock drops to $2.50, then your incurred net loss will be about $260 (excluding commissions). Please understand that the premium received is mostly intrinsic value, as it has only about 0.20 of time value. Sorry, but there's simply no free lunch in this game. Walt
Long stock plus short put means you are long over 100 delta, what's that called? Hmmm. Not a typical strategy, for sure. I think you meant long stock long put. Now way your risk graph is "low risk" unless you incorrectly misstated your position. No soup for you!
? You're long (additional) stock and short the call at the put strike. Synthetically. If you're talking single units, you're long 200 shares of stock and short 1 call at the put strike. Is that the position you want?
this is not something that a "trader" would do, but an investor would. Also, this is not a trade that you'd do at the same time, because the thought processes are different. You go long a stock when you feel that the stock will go up. You short a put when: you feel that the stock won't go down you want to buy the stock but at a lower price It wouldn't be advantageous for an investor to enter both at the same time. He should commit to one or the other. Down the road, they may enter into the second position if their views change.