No one said "go back to basics." It was suggested that you should do yourself a very big favor and read a basic book on options because based on the questions you've been posing, it's clear to many that you need to learn a lot more before you're ready to trade. If you really are 16 with only 2k and trading in daddy's account, it's highly unlikely that you're going to survive very long in the option arena. You don't want to be told anything, That's cool. But prepare yourself to CHILL big time if you lose your wad.
You buy the stock for 3.73. You sell a 7.5 put at 3.6. If the stock goes to zero you have a loss of 3.73 on the stock and 3.90 on the put (the put is worth 7.5 and you sold it at 3.60). So the total loss is 7.63 or $763 per contract/100 shares.
Here is my honest opinion. You did not make a "mistake" because you didn't know or understand what you were talking about in the first place. To make matters worse, several posters posted incorrect information and you agreed with them because you didn't have a basic understanding of what you were asking. My advice when it comes to options is to read first, ask questions later. This way you will have a better chance of knowing which answers make sense and a better chance of actually understanding the answers within some context. Lose the "attitude" and admit to yourself that you don't know very much about options and learn. The options market doesn't care if your feathers get ruffled because someone dares to suggest that your options knowledge is lacking. However, if you trade in the options market without this knowledge, your chance of success will be slim to none. Take this advice, don't take this advice, it is up to you. Joe.
Well said u21c3f6. If no one would've jumped in to correct the first page of agreement on it being a married put, you'd basically have a few guys running around trying to sell puts all day long, which has ruined traders upon traders. I'd almost feel bad for them when they call their broker and get laughed off the phone for trying to do this.
wow, so much "noise". I wish there was a way to delete people's incorrect posts. I'll refer you all back to my post at the end of page 2. These are two different trades, they do not mitigate risk, or have any combined value. It's better to think of them as separate trades. You could do both at the same time, but still, I'd see them as two different positions.
Agreed... this isn't even a complicated structure. If you've perused any options book like Hull at the very least you should be able to use excel to construct a total position PNL... or even know what it looks like.
It's my money and I can't commit fraud by creating an account. Just cause you're bitter because you're twice my age and your P/L is crap doesn't mean you have to be condescending. I quote: "This is called "GO BACK TO BASICS! YOU DON'T KNOW $HIT!" ... " that's what someone said. So are you stupid or calling me a liar?
Seriously, go buy Hull or Natenberg, you will be much better off with that kind of background knowledge.