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Selling puts is a popular strategy used to generate income on an underlying product that a trader has a neutral to bullish outlook and a bearish volatility outlook. Selling a put can be used instead of placing a buy limit order when a trader is looking to establish a long stock position at a specified price.
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the debit paid to put on the position. 0 50 55 60 65 70 +-Bull Call Spread Net Position Bear Put Spread (Debit Put Spread) Contains two puts with the same expiration but different strikes. The strike price of the short put is below the strike of the long put, and will re-quire a net cash outlay (net debit) at the outset. Profit and loss are limited
In general, the more out-of-the-money (higher strike) calls, the more bullish the strategy. Profit characteristics: Profit increases as market rises. At expiration, break-even point will be call option exercise price A + price paid for call option. Loss characteristics: Loss limited to amount paid for option.
Using the example of ABC Corporation trading at $120, a one-month put option is trading at $4.00. The buyer of this put option has the right, but not the obligation to sell 100 shares of ABC for $120 per share at any time during the life of the contract. For this right, the buyer of the put contract pays $4.00 to the seller.
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entries •Volatility breakout, consolidation or trend reversal. •Time based, chart based, volatility based. •Chart based patterns: flag, channel breakout, significant chart level,
1. Sell the put option with a strike price lower than the current stock price. Remember that for option contracts in the U.S., one contract is for 100 shares. So when you see a price of $1.00 for a put, you will receive $100 for one contract. For S&P Futures options, one contract is exercisable into one futures con-.
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Entry Pattern #2 moving average cross-over. Entry signal combining a: A “trend” moving average (longer) to identify a pull back. A “trigger” moving average (shorter, generally exponential). Only to be used when the higher time frames or institutional order flow has an obvious trend. (multiple charts).
