because you are selling a put as well as doing the buy write. The put will behave as a stock on the downside.
The puts are in anticipation to be exercised to buy another 100 shares each time only if price drops by $10 for maximum of 3 times.
Have anyone here actually sold puts to buy shares as price drops? 1 put or call contract = 100 shares, understand?
Fwiw... that's a big red flag. Don't fall for it. Find another stock. Pick one of these former high fliers that's down 60%+, no ADR's. I wouldn't trust BABA.
I hesitate to throw one out there, because if it keeps dropping I don't want to be the one that suggested a volatile stock that you lose money on, but I will. Just do your own DD. Maybe Twilio, but I'd wait for it to get in the $180's, or at least after they report earnings on 2/8 ISRG will work too, they report this week and I think it's gonna drop. Use it if gets to $240. Their options are pricey though. Snapchat will work, but again, I'd wait for earnings, 2/8, and go from there. There's more. Plenty of beat down quality tech that's not propping up the NDX.
Yes, except for the first 100 shares where I buy it straight away for anticipated $10 gain besides waiting for put and call option premium to expire.