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Options are a short-term vehicle whose price depends on the price of the underlying stock, so the option is a derivative of the stock. If the stock moves unfavorably in the short term, it can ...
Buy put options on falling stocks. Put options rise in price when the underlying stock falls in price, and this basic option strategy gives the put owner the ability to multiply their money over ...
Call options: A call option lets you buy the stock by a certain date at a specific price. Investors who buy call options usually expect the price of the stock to increase so that they can buy it ...
The seller's potential loss on a naked put can be substantial. If the stock falls all the way to zero (bankruptcy), his loss is equal to the strike price (at which he must buy the stock to cover the option) minus the premium received. The potential upside is the premium received when selling the option: if the stock price is above the strike ...
Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options' variables. Call options , simply known as Calls, give the buyer a right to buy a particular stock at that option's strike price .
If the stock price drops below the $3 strike price on the put then the investor may exercise the put and the person who sold it is forced to buy the investor's 100 shares at $3. The investor loses $2 on the stock but can lose only $2 (plus fees) no matter how low the price of the stock goes. For example, if the stock price falls to $1 then the ...
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