Breakfast News: 3 Options Moves for a Jumpy Market
Selling puts, covered calls, and protective puts, explained in plain English.
In the current market, three types of options can help navigate volatility: selling puts, selling calls, and buying puts for protection. Selling puts involves receiving a premium from another investor who agrees to buy your shares at a predetermined price. If the stock price stays above the strike price, you keep the premium. If it drops, you buy shares at the strike price and pay less per share.
Selling calls lets you earn a premium by agreeing to sell shares at a specific price, capping potential gains. Buying puts provides downside protection by allowing you to sell shares at a set price, limiting losses. Before entering an options trade, ensure you're comfortable if the other party exercises the contract. Consider the premium, potential losses, and your portfolio's composition before deciding.
Options trading carries risks and isn't suitable for all investors; hypothetical examples don't include commissions or taxes.
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