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Some income-generating options strategies — short puts and uncovered calls, for example — offer the potential for substantial loss. ... loss on short puts is capped at the strike price * 100 ...
Put protects downside while call premium offsets cost of buying put. Gains capped if shares called away. Loss of dividends from assignments. Long Straddles. Speculation. Buying call and put ...
With puts, on the other hand, you write and sell a contract in which the buyer has the right to sell you the underlying asset. You can make a steady stream of income off the premiums that these ...
A long call ladder consists of buying a call at one strike price and selling a call at each of two higher strike prices, while a long put ladder consists of buying a put at one strike price and selling a put at each of two lower strike prices. [1] A short ladder is the opposite position, in which one option is sold and the other two are bought. [1]
The risk to a holder of a short straddle position is unlimited due to the sale of the call and the put options which expose the investor to unlimited losses (on the call) or losses limited to the strike price (on the put), whereas maximum profit is limited to the premium gained by the initial sale of the options. Losses from a short straddle ...
Guts - buy (long gut) or sell (short gut) a pair of ITM (in the money) put and call (compared to a strangle where OTM puts and calls are traded). Butterfly - a neutral option strategy combining bull and bear spreads. Long butterfly spreads use four option contracts with the same expiration but three different strike prices to create a range of ...
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 advantage of buying a put over short selling the asset is that the option owner's risk of loss is limited to the premium paid for it, whereas the asset short seller's risk of loss is unlimited (its price can rise greatly, in fact, in theory it can rise infinitely, and such a rise is the short seller's loss). The put buyer's prospect (risk ...
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