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@Optionspuppy：22 June sell covered put on Google $100 earn $4(5%) for half a year with a $24 buffer for it to drop to break even price $Alphabet(GOOGL)$ $Vanguard S&P 500 ETF(VOO)$ A cash-secured put is a trading strategy in options trading where an investor sells a put option contract and secures the obligation by having enough cash in their account to buy the underlying asset if the option is exercised. Let's consider an example involving Google stock, which is currently trading at $120. We'll assume a strike price of $100 and a premium of $4, with a six-month expiry. Selling a cash-secured put involves the following steps: Understanding the Basics: Before delving into selling a cash-secured put, it's important to have a basic understanding of options. Options are financial derivatives that give the buyer the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price (strike price) within a specified time period (expiry date). Selecting the Strike Price and Expiry Date: In this example, the strike price is set at $100, meaning the put option buyer has the right to sell the Google stock to the put seller at $100 per share. The expiry date is set to six months from the current date. Analyzing the Premium: The premium represents the price at which the put option is bought or sold. In this case, as the seller of the put option, you would receive a premium of $4 for selling the contract. This premium is immediately credited to your account. Calculating the Maximum Risk: The maximum risk in a cash-secured put strategy occurs if the stock price declines significantly and the put option is exercised. In this example, the maximum risk would be the difference between the strike price and the premium received, multiplied by the number of shares. Since one put option represents 100 shares, the maximum risk would be ($100 - $4) x 100 = $9,600. Cash Securing: To implement a cash-secured put strategy, you need to have enough cash in your account to cover the potential purchase of the underlying asset. In this case, you would need $10,000 ($100 x 100) to secure the put option. Potential Outcomes: At expiration, there are three potential outcomes: a) Stock price > Strike price: The put option expires worthless, and you keep the premium as profit. In this example, if the stock price remains above $100 at expiry, you would earn a profit of $4. b) Stock price = Strike price: The put option expires worthless, and you keep the premium as profit. No shares are purchased in this case. c) Stock price < Strike price: The put option is exercised, and you are obligated to buy the stock at the strike price. You would use the cash in your account ($10,000) to purchase the shares. Calculating the Percentage Gain: To calculate the percentage gain, subtract the premium received from the total investment (strike price x number of shares) and divide the result by the total investment. Then, multiply the outcome by 100 to get the percentage gain. In this example, the percentage gain would be (($100 x 100) - $4) / ($100 x 100) x 100 = 9.96%. per year To summarize, in the given example involving Google stock trading at $120, a strike price of $100, and a premium of $4, you would sell a cash-secured put by following the steps mentioned above. The potential outcomes at expiry can result in a profit of $4 if the stock price remains above the strike price, with a percentage gain of 9.96%. However, if the stock price falls below the strike pric However, if the stock price falls below the strike price, you may face the risk of being assigned the stock and having to purchase it at the strike price. In this case, you would use the cash secured in your account to buy the shares. Regarding the maximum risk, as mentioned earlier, it is $9,600. This occurs if the stock price becomes zero, and you are obligated to buy the shares at the strike price. It's crucial to carefully assess the potential risks and rewards of options trading and consider your risk tolerance and market outlook. Options trading involves inherent risks, and it's recommended to thoroughly understand the strategy and consult with a financial advisor or professional before engaging in options trading activities. In summary, a cash-secured put is a strategy where you sell a put option while having enough cash in your account to cover the potential purchase of the underlying asset. In the example of selling a cash-secured put on Google stock with a strike price of $100, a premium of $4, and a six-month expiry, you would receive a premium of $4 upfront. If the stock price remains above the strike price at expiry, you would keep the premium as profit. If the stock price falls below the strike price, you may be obligated to buy the stock using the cash in your account. The percentage gain in this example is approximately 9.96%, calculated by dividing the premium received by the total investment (strike price x number of shares) and multiplying by 100. The maximum risk is $9,600, which occurs if the stock price becomes zero, and you are obligated to buy the shares at the strike price. Please note that options trading involves risks, and it's important to have a good understanding of the strategy and consult with professionals before making any investment decisions. The example provided is for illustrative purposes only and should not be considered financial advice. 🐯 🐯🐯🐯🐯🐯 Dear tiger readers Please help to share post also clicking the repost button and follow me as I published my post on my ideas and trading experiences and sometimes including my current dividend positions and winning sell call and put trades . 🦁🦁🦁🦁🦁Do follow me share my posts regularly So more people can learn about my trading methods and winning trades on selling covered calls and puts options I share my options trade below usually I sell at a higher price then buy back at a lower price for a profit I 🌈🌈🌈🌈🌈🌈🌈🌈 As always do your on due diligence and tradings have risks Do feature me @MillionaireTiger @Daily_Discussion @TigerStars so more people learn sell cash covered put on good stocks and earn 1% or more per month Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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