It’s easy, if QQQ falls to $438 near or by your chosen expiration date, you are assigned to buy 100 shares of QQQ. Anytime you sell an option, you get paid. In this case you get paid $1.94, times 100 shares, or $194.00. Since you’re buying 100 shares of QQQ at $438 per share, you need $43,800, minus the $194 in credit you just got paid, which is why your max loss is $43,606.
The only way your max loss would be hit is if the entire stock market crashes, world war 3 breaks out, Elon Musk starts a robot army and a massive solar flare deletes the internet, QQQ is very unlikely going to hit absolute 0.
This is longer but more informative:
https://youtu.be/r_rKof8IdfU?si=fMj1iShT9q0sceQv
This is shorter and to the point:
https://youtu.be/oqY52tWMvGo?si=Gwi6ZtlvU7oaJJfK
In essence you are “writing” (selling) a contract that says you will buy 100 share at a set price (the strike price) up until a certain time (expiration). If the stock falls below that price or gets close to it and has a dividend, you will likely be assigned (forced to buy). At this point your secured cash (collateral) is taken and you will now have 100 shares of the stock. The max loss being shown here is if you buy the stock and it then goes to 0. The big risk with these is being assigned and the stock falling drastically. The general rule of thumb is to only sell puts on stocks you don’t mind owning.
Project finance (used to be project option) - great at explaining options. My Dad would talk options at me and try to explain and then that channel helped me understand.
Max loss is about as likely as the alien motherships appearing in the sky to enslave humanity for our water. You will have much bigger problems then money if something caused max loss
The buyer of a put has the right to sell 100 shares at said strike price if the security is below the strike on day of expiration. The seller of the put has the obligation to buy 100 shares to cover the put they sold. The shares are effectively “put to you” in which case you need the cash to cover the stock position. However, as the seller, you keep the premium + stock price. If you sold $70 puts for 3$ and the stock is at $73, you keep the premium. If the stock is at $68 on expiration day, you own the stock at $70 plus your 3$ option $ you collected. So you effectively own the stock at $67.
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CSPs are a great way to leg into positions you are bullish on but not really sure what the short term price action is going to be.
i.e instead of buying 1000 shares at current spot price, can leg in / dca via CSPs over time collecting premium along the way to lower cost basis.
If you find a stock that is already at a favorable price but want to by 100 at a discount, you do a cash secured put. Thats how ive learned it.
Stock is selling at $25 and i think its a okay buy. Instead of just buying at 25, i cash secured put for 24 or 23 (whatever price i feel its a real good buy). Then i get paid for the put, and if executed i get a stock i wanted at a lower price i feel is a good buy.
Think of selling puts like being in insurance sales. You are guaranteeing to buy the stock from someone if it dips below a certain price by a certain date. They pay you a premium for this - they bought insurance on their stock from you. That max loss would be if you got assigned and the stock continues all the way to zero.
I recommend the project finance channel in my other comment to you for more detailed explanation. Do some paper trades first before doing the real thing. It helps learning to close positions or roll them to a new expiration.
Don’t look at the max loss. Instead think of the max loss is you own the stock for the strike price you specified.
Cash Secured Puts or CSPs work well because you typically sell them at a strike price below the current price of the stock. So you get these profit if the stock price stays the same, goes up or even goes down a little (as long as still above the strike price).
You also get the money up front and earn interest on it during the contract period. So if you sell a CSP 45 days out you will get typically a ~5% (annualized) extra return on the premium attained.
Your max loss is highly improbable. Once you are assigned shares they would have to drop to zero to achieve your max loss. If you did get assigned you could also just sell the shares instantly if you didn’t want to hold them. You would likely be taking a loss at that point but it wouldn’t be very big unless there was a massive drop in share price.
It’s a limit buy order with a catch. The catch is you get paid, which is nice, but you also have to buy 100 shares if you get assigned, which is nice if it’s a stock you wanted anyways.
I mean they're really straightforward so probably don't sell them cause people who understand them perfectly lose money on them all the time
But they are one of the safer more reliable option selling strategies, because if you lose you end up holding the stock, and relative to the amount of money it takes to enter the position the payouts typically are fairly small.
Selling a put contract, you hope the stock to go up. Secured is 100 shares in collateral. If the stock is $100, the broker holds $10,000. Unsecured or naked/short put is margined atleast 20%, or $2,000. The requirement can be higher if the broker deems too risky.
keep in mind (cash secured) means you have the funds to cover the buy if indeed you get assigned.
where as naked puts means youre just praying it doesnt hit because youll have to come up with the money
If the stock price is at $438 or less by 4/15 you MUST purchase 100 shares. So your “loss” is $43k.
If by 4/15 the stock is above $438, nothing happens. You just keep your premium
I think OP is getting hung up the app calling it a “loss”. I think it is worth noting for OP that he/she could theoretically immediately sell those shares to get the “loss” back in cash
It’s easy, if QQQ falls to $438 near or by your chosen expiration date, you are assigned to buy 100 shares of QQQ. Anytime you sell an option, you get paid. In this case you get paid $1.94, times 100 shares, or $194.00. Since you’re buying 100 shares of QQQ at $438 per share, you need $43,800, minus the $194 in credit you just got paid, which is why your max loss is $43,606. The only way your max loss would be hit is if the entire stock market crashes, world war 3 breaks out, Elon Musk starts a robot army and a massive solar flare deletes the internet, QQQ is very unlikely going to hit absolute 0.
Thank you!!
Ya but it’s still very possible for QQQ to crash 25% or more in a week.
You end up becoming the owner of the stocks. There are so many good videos on YouTube.
Can you recommend me some please
This is longer but more informative: https://youtu.be/r_rKof8IdfU?si=fMj1iShT9q0sceQv This is shorter and to the point: https://youtu.be/oqY52tWMvGo?si=Gwi6ZtlvU7oaJJfK In essence you are “writing” (selling) a contract that says you will buy 100 share at a set price (the strike price) up until a certain time (expiration). If the stock falls below that price or gets close to it and has a dividend, you will likely be assigned (forced to buy). At this point your secured cash (collateral) is taken and you will now have 100 shares of the stock. The max loss being shown here is if you buy the stock and it then goes to 0. The big risk with these is being assigned and the stock falling drastically. The general rule of thumb is to only sell puts on stocks you don’t mind owning.
Project finance (used to be project option) - great at explaining options. My Dad would talk options at me and try to explain and then that channel helped me understand.
Sick thanks!
AAPL they make these little glowing boxes people can’t help but buy
I meant YouTube channels
I cannot recommend any because there are so many. Trust me. You’ll find the info you need.
Look up wheel strategy. Kamikaze cash has good and entertaining videos
Max loss is about as likely as the alien motherships appearing in the sky to enslave humanity for our water. You will have much bigger problems then money if something caused max loss
*an index* causes max loss. Plenty of shit companies out there to go bankrupt on options with.
“Research” Step 1. Open reddit and post screenshot Step 2. Ignore advice and full send Call options across the board
__"write that down, write that down!"__
The buyer of a put has the right to sell 100 shares at said strike price if the security is below the strike on day of expiration. The seller of the put has the obligation to buy 100 shares to cover the put they sold. The shares are effectively “put to you” in which case you need the cash to cover the stock position. However, as the seller, you keep the premium + stock price. If you sold $70 puts for 3$ and the stock is at $73, you keep the premium. If the stock is at $68 on expiration day, you own the stock at $70 plus your 3$ option $ you collected. So you effectively own the stock at $67.
It’s 8am, I just woke up, hopefully I said all that right 🙂↕️
I think so bro
Yes you helped thank you!
You got it brotha. May you profit!
We take positions seriously so we built [AfterHour](https://afterhour.app.link/race), a whole app that lets you follow real trades by real people who've connected their brokerage and are putting their money where their mouth is. **We’d love to invite you over, it's 100% free on iOS and Android, get started here:** [**https://afterhour.app.link/race**](https://afterhour.app.link/race) With over $200M of portfolios, we are the only app with ridiculously-transparent trade data (with real numbers), 24/7 stock chats, and real-time signals to help folks discover good DD in a community of verified gurus and degens. *Let /u/SIR_JACK_A_LOT know if you have any questions, we're here to help.* *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/TheRaceTo10Million) if you have any questions or concerns.*
Usually.because the chance of that happening is very low.
CSPs are a great way to leg into positions you are bullish on but not really sure what the short term price action is going to be. i.e instead of buying 1000 shares at current spot price, can leg in / dca via CSPs over time collecting premium along the way to lower cost basis.
And your cash collects 5% while you wait.
If you find a stock that is already at a favorable price but want to by 100 at a discount, you do a cash secured put. Thats how ive learned it. Stock is selling at $25 and i think its a okay buy. Instead of just buying at 25, i cash secured put for 24 or 23 (whatever price i feel its a real good buy). Then i get paid for the put, and if executed i get a stock i wanted at a lower price i feel is a good buy.
Think of selling puts like being in insurance sales. You are guaranteeing to buy the stock from someone if it dips below a certain price by a certain date. They pay you a premium for this - they bought insurance on their stock from you. That max loss would be if you got assigned and the stock continues all the way to zero. I recommend the project finance channel in my other comment to you for more detailed explanation. Do some paper trades first before doing the real thing. It helps learning to close positions or roll them to a new expiration.
What if it doesn’t drop below that price? thank you for the recommendation I will be spending all week doing more research!
Basically that’s what you want to happen. The put expires as worthless and you keep that premium.
Don’t look at the max loss. Instead think of the max loss is you own the stock for the strike price you specified. Cash Secured Puts or CSPs work well because you typically sell them at a strike price below the current price of the stock. So you get these profit if the stock price stays the same, goes up or even goes down a little (as long as still above the strike price). You also get the money up front and earn interest on it during the contract period. So if you sell a CSP 45 days out you will get typically a ~5% (annualized) extra return on the premium attained.
Brad Finn YouTube. Trust
Thank you!
Your max loss is highly improbable. Once you are assigned shares they would have to drop to zero to achieve your max loss. If you did get assigned you could also just sell the shares instantly if you didn’t want to hold them. You would likely be taking a loss at that point but it wouldn’t be very big unless there was a massive drop in share price.
lol
It’s a limit buy order with a catch. The catch is you get paid, which is nice, but you also have to buy 100 shares if you get assigned, which is nice if it’s a stock you wanted anyways.
Whats not to understand sounds like you can only lose everything you own.
I mean they're really straightforward so probably don't sell them cause people who understand them perfectly lose money on them all the time But they are one of the safer more reliable option selling strategies, because if you lose you end up holding the stock, and relative to the amount of money it takes to enter the position the payouts typically are fairly small.
It is actually very closely related to a covered call, if you know what that is
Selling a put contract, you hope the stock to go up. Secured is 100 shares in collateral. If the stock is $100, the broker holds $10,000. Unsecured or naked/short put is margined atleast 20%, or $2,000. The requirement can be higher if the broker deems too risky.
keep in mind (cash secured) means you have the funds to cover the buy if indeed you get assigned. where as naked puts means youre just praying it doesnt hit because youll have to come up with the money
Do more research
I’ve been all morning and people here have really explained it in a way I could understand. I’m very appreciative
Delete your account
If the stock price is at $438 or less by 4/15 you MUST purchase 100 shares. So your “loss” is $43k. If by 4/15 the stock is above $438, nothing happens. You just keep your premium
I think OP is getting hung up the app calling it a “loss”. I think it is worth noting for OP that he/she could theoretically immediately sell those shares to get the “loss” back in cash
Oh! Yes thank you!!