How to start?
Step 1 Click【Put】to find all the put options of the stock
Step 2 Select a strike price and an expiration date
The expiration date is the last day the option can be exercised. The time value of an option naturally shrinks as the expiration date approaches. This makes it more favorable to sellers in a relatively calm market. Under normal circumstances, with a shorter expiration date, as compared to a longer expiration date, stock prices have a lower probability of hitting the strike price, so it is more beneficial to sellers. Of course, it is necessary to guard against possible adverse scenarios.
In addition, generally, and without considering other factors, the shorter the time to expiration, the lower the option premium will be. You should set a suitable expiration date based on your anticipation and strategy.
The strike price is the price at which an asset is bought or sold, as specified in the option contract. With the cash-secured put strategy, option sellers often set the strike price at the price that they are willing to buy the underlying stock at. If you adopt this strategy and are willing to buy the stock at a certain price range, you can refer to the following features of put options to determine the strike price.
Based on the relationship between the current market price and the strike price of a stock, put options can be divided into three types: in the money, at the money, and out of the money. When all other conditions are equal, the premium and probability of being exercised by the buyer for these three types of put options are as follows. You should set a reasonable strike price based on your actual situation.
Apart from the underlying stock price, the strike price, and the expiration date that we've mentioned, other factors, including implied volatility, risk-free rate, and dividend yield, may also affect the price of an option.
Step 3 Set your sell order for a put option
Tips: The quoted premium of an option pertains to one share of the underlying stock in the US market, and each option contract controls 100 shares of the stock.
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more
