https://www.investopedia.com/articles/optioninvestor/09/selling-options.asp
https://robinhood.com/support/articles/795YtJI3BMMifY1E8BWYuX/basic-options-strategies/
https://www.investopedia.com/terms/c/coveredcall.asp
Options
Call option
Used
Put option
Used for hedging – the speculate on downside price action.
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A trader has stock X in her portfolio. She wishes to ensure that losses in the underlying asset do not exceed a certain amount. So, she will use a put option – in this case, a protective put – a strategy to hedge risk by ensuring that losses in the underlying asset do not excelled a certain amount.
- If she exercises the option, she would then sell the stock at the strike price of the put.
A trader does NOT hold the underlying stock of a put option in their portfolio but enters into and exercises a put option a short-position in the stock is created.
Options – basics
Call option
A contract where the option holder purchases the right, but not the obligation, to buy an agreed-upon amount of the underlying security at an agreed-upon price within an agreed-upon period of time before the expiration date of the option contract.
Section title
By obtaining multiple fixed-income securities each of which have a different maturity date – intentionally spread across several months/years – the proceeds can be reinvested regularly as each bond matures. By making multiple smaller bond purchases with varying dates, interest-rate risk can be hedged against, liquidity can be staged, and credit risk can be diversified.
Put option
A contract where the option buyer purchases the right, but not the obligation, to sell/sell-short an agreed-upon amount of the underlying security at an agreed-upon price within an agreed-upon period of time before the expiration date of the option contract.
Strike price
The strike price is the price agreed on by the buyer and seller and is the price at which the put option buyer can, if they choose, sell the underlying security.
| Change | Call Option | Put Option |
| Decline in the price of the underlying asset | Increases in value | |
| Increase in volatility of the underlying asset price | Increases in value | |
| Decline in interest rates | Increases in value | |
| Increase in price of the underlying asset | Lose value | |
| Decrease in volatility of the underlying asset price | Lose value | |
| Increase in interest rates | Lose value | |
| Time of expiration nears | Lose value |
Underlying security of options
- Stocks
- Currencies
- Bonds
- Commodities
- Futures
- Indexes
still creek investing 