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The option is worth $3 (the $23 stock price minus the $20 strike price) and the trader has made a profit of $2.50 ($3 minus the cost of $0.50). ... In short, the payoff structure is exactly the ...
Going short, or short selling, is a way to profit when a stock declines in price. While going long involves buying a stock and then selling later, going short reverses this order of events.
The most basic is physical selling short or short-selling, by which the short seller borrows an asset (often a security such as a share of stock or a bond) and quickly selling it. The short seller must later buy the same amount of the asset to return it to the lender.
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 ...
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Strangle - where you buy a put below the stock and a call above the stock, with profit if the stock moves outside of either strike price (long strangle). [4] Strangle can be either long or short. In short strangle, you profit if the stock or index remains within the two short strikes. [citation needed]
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