FundRobot » Fund Price » Options trading covered puts?

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Old   #1 (permalink)
 
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Default options trading covered puts

I am familiar with naked put, naked call and covered call. But can someone tell me what happens in a covered put (stock already owned) when the price drop below the short strike?



Since i already owned the stocks am i obligated to buy more stocks?
Mary500 is offline   Reply With Quote
Old   #2 (permalink)
 
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Default options trading covered puts

If you buy a put you have the option to put (sell) the stock by exercising. If you are uncovered you would have to buy the stock in the market to put it on to the writer. If you are covered you just deliver the stock. You would exercise if the stock price went down. What's not to understand?
Stocks4Me is offline   Reply With Quote
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Old   #3 (permalink)
 
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Default options trading covered puts

Sounds like you have the option to sell the stock at the strike price, not buy it, if you bought the put. If the stock continues to fall, you'll possibly want to exercise that if your feelings are changing about the stock.

If you sold the put, you're on the hook to purchase more (100 shares/contract) at the strike price. Either buy-to-close the position or be prepared with the funds to purchase.
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Old   #4 (permalink)
 
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Default options trading covered puts

Did you buy the put or sell the put? If you sold the put then you collected on the transaction so you have to buy the stock at the strike price of the put. If you bought the put this will protect your losses on the stock. Even if the stock keeps falling, at the time of expiration.
NewEra50 is offline   Reply With Quote
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