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Put option: A put option gives its buyer the right, but not the obligation, to sell a stock at the strike price prior to the expiration date. When you buy a call or put option, you pay a premium ...
Unlike selling a call option, selling a put option exposes you to capped losses (since a stock cannot fall below $0). Still, you could lose many times more money than the premium received.
A covered call involves selling a call option (“going short”) but with a twist. Here the trader sells a call but also buys the stock underlying the option, 100 shares for each call sold ...
The holder of an American-style call option can sell the option holding at any time until the expiration date and would consider doing so when the stock's spot price is above the exercise price, especially if the holder expects the price of the option to drop. By selling the option early in that situation, the trader can realise an immediate ...
Puts may also be combined with other derivatives as part of more complex investment strategies, and in particular, may be useful for hedging. Holding a European put option is equivalent to holding the corresponding call option and selling an appropriate forward contract. This equivalence is called "put-call parity".
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.
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