Options call and put examples
The seller collects the purchase price of the option but has the obligation to sell shares of the stock if the buyer decides to exercise the option. He had to mortgage his house. Buying puts is a more conservative way of betting on a stock declining in price. If the stock increases in price you may sell the put for a loss. If the call options call and put examples already has shares in his account, they are sold to the buyer at the strike price.
If the seller gets called - he must sell the stock. Because the price of options can change very quickly and dramatically, you must continually watch their price movement. Options call and put examples you sell a put, you want the price of the stock to go up so you don't get the stock put to you - buy the stock for more than it's worth.
If you not prepared to do so, don't buy or sell options. The put seller must come up with money to buy the stock. What the put seller must do.
You can sell covered calls to generate a stream of options call and put examples. If the stock price does not rise enough during the period of the contract, you won't get called and won't have to sell the stock so you keep the money you received when you sold the call. The put seller must come up with money to buy the stock. If you don't have the financial resources to cover the obligation of buying the stock from the buyer of the put, you sold "naked puts". Alternative Actions for the Put Buyer.
If the stock price declines, the value of the put rises options call and put examples you would sell the put for a profit. A put option goes up in price when the price of the underlying stock goes down. Because the price of options can change very quickly and dramatically, you must continually watch their price movement.
If your broker lets you, you may sell "uncovered "or "naked" calls in a margin account. Use calls and puts judiciously. With a short sale, you have an unlimited downside liability if the stock goes up.
With a put option your only liability is the price you paid for the put. He had to mortgage his house. It tells about a trader who sold naked puts and experienced financial ruin. And you don't have to own the stock to profit from the price rise of the stock.
If the call seller already has shares in his account, they are sold to the buyer at the strike price. If not, you'll probably loose most or all the money you paid for the option. Alternative Actions for the Put Seller.