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Generating income from options strategies is a generally lower-risk strategy than trying to multiply your money through buying naked calls and puts. That certainly doesn’t mean it’s low risk ...
For example, if you think Tesla stock is about to make a huge move up, rather than laying out $20,000 or more per share to buy 100 shares of the stock, you can spend perhaps $200 per option to ...
Example: Stock X is trading for $20 per share, and a call with a strike price of $20 and expiration in four months is trading at $1. The contract pays a premium of $100, or one contract * $1 * 100 ...
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 the duration of the option contract ...
The "breakeven" stock price would be $36.35: the lower strike price plus the credit for the money you received up front. Traders often using charting software and technical analysis to find stocks that are overbought (have run up in price and are likely to sell off a bit, or stagnate) as candidates for bearish call spreads.
Mildly bullish trading strategies are options that make money as long as the underlying asset price does not decrease to the strike price by the option's expiration date. These strategies may provide downside protection as well. Writing out-of-the-money covered calls is a good example of such a strategy. The purchaser of the covered call is ...
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