STRIKE PRICE - This is the price at which you're "insuring" the underlying stock. UNDERLYING - This simply refers to the underlying stock that you're selling the put against, be it Coca-Cola (KO), Microsoft (MSFT), Johnson & Johnson (JNJ), or any other optionable stock. Here's the key terminology you need to know: Like a lot of specialized topics, option trading has its share of jargon, but once translated into English, it's actually very easy to understand. Not in my view - especially when this form of insurance can be both lucrative and safe as we'll see.īut first, let's look at some key definitions and examples. In other words, you're insured at the $30 share price level - no matter how low the stock trades, you can exercise your contract and force someone else to buy your shares for $30/share.Īs a put seller, that makes you the insurance company. It translates well because puts are basically insurance for the share price of a stock.Įxample: If you own 100 shares of XYZ and you purchase a put at the $30 strike price, you can exercise your contract up to the expiration date and "put" the shares to the put seller at $30/share. Chapter 7 - Bonus Put Selling Resources - Want even more? This section includes a comprehensive collection of links to original articles covering all aspects of the put selling process.
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You also need to know how to most effectively manage your winning trades and how to safely repair your losing trades. Chapter 6 - Managing, Adjusting, and Repairing Naked Puts - Being able to find great put selling trades, and knowing when and how to set them up, is only part of the battle.Chapter 5 - Best Position Size When Selling Puts - How many naked put contracts you sell when initiating a trade is vitally important, and in this section, I share what I believe is the best guideline for position size, why this guideline has served me well, and why you don't need to be overly rigid when using it.In this chapter we're going to look at the specific conditions that represent attractive put selling set ups as I show you precisely how I go about finding great put selling trades. Chapter 4 - How to Find Great Put Selling Trades - In Chapter 3, we looked at the type of stocks that are best for selling puts (and the type of stocks that aren't).Chapter 3 - Best Stocks for Selling Puts - In this section, we look at important specific criteria when selecting an underlying stock on which to sell puts along with whether it's better to sell puts on value stocks or on growth stocks.Selling Puts to Buy Stock at a Discount - There are only two viable reasons to sell puts - your job is to be clear on your purpose so you can then focus on maximizing your efforts. Chapter 2 - Selling Puts for Income vs.Chapter 1 - Put Selling Basics and Overview - What is a put option, how do you sell a put, and why would you want to?.Specifically, here's our table of contents: Be sure to bookmark this page because you're going to want to come back to it again and again (and also consider sharing it with friends and family you believe would benefit from it).