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Name. Purpose. How it Works. Benefits. Risks. Covered Calls. Income. Investor owns underlying stocks and sells call options allowing buyer to purchase the shares at set strike price by expiration ...
A hedge fund might sell short one automobile industry stock, while buying another—for example, short $1 million of DaimlerChrysler, long $1 million of Ford.With this position, any event that causes all auto industry stocks to fall will cause a profit on the DaimlerChrysler position and a matching loss on the Ford position.
A long butterfly options strategy consists of the following options: Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X; Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows:
Being long a stock means that you own it and will profit if the stock rises. Being short a stock means that you have a negative position in the stock and will profit if the stock falls. Being long ...
Naked Put Potential Return = (put option price) / (stock strike price - put option price) For example, for a put option sold for $2 with a strike price of $50 against stock LMN the potential return for the naked put would be: Naked Put Potential Return = 2/(50.0-2)= 4.2% The break-even point is the stock strike price minus the put option price.
These investment options can help you tap into the potential higher returns of stock and bond investments while maintaining a relatively low risk profile. 1. Dividend-paying stocks
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