Now, on flipside of selling a 30$ put which suggests you dont believe the price will fall below 30$ by expiration suppose you arent so optimistic about a stock.... suppose you think it may go up to 35 in 16 monyhs but it wont go higher than that...what do you do?
You can buy 100 shares of a stock, and sell at 35$call for 16 months out and the broker will collateralize your 100 shares, while the buyer of the call whoch thinks it WILL be over 35 (or it may just part of an options spread bet) pays you the premium for guaranteeing you will walk away at 35$/share.
Currently, this option for january 2022 is valued at approximately 1400$...
So if the price doesnt go over 35 you get to keep the 1400 now...and the 100 shares in 16 months get returned
If the price DOES finish at, lets say 36$, you get to keep the 1400 BUT you have to sell your shares at 35$each for 3500+1400 on your 3,125 investment. So youve limited your gain to a maximum of 4,900$on your investment.
Lets so, however, that the price drops to 20$ in this event you would keep the 1400 but your 3125 stock value would drop to 2000 meaning you 275.
If the stock drops to 15 you get 1500$in shares back and 1400 i. Premium =225$ loss etc
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