Covered Puts are usually used when the investor is expecting falling stock prices and wants to buy certain stocks at a lower price than the current market value. In this case, the investor acquires a put option on the relevant share. If the price of the individual value develops according to its go to this web-site our expectations, the investor will receive a return for waiting for the lower price.
If, on the other hand, the price trend does not meet its expectations and the value of the file increases, the put option expires worthless.
In the case of pop over here what binary options, however, Covered Puts are extremely rarely used because no such protection is necessary. The reason: binary options are determined using fixed yield.
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In the most unfavorable case, ie if the share of the investor increases, he loses the option premium. By contrast, the price difference is expected as profit. Since the value of a share can theoretically also drop to zero, there are no unlimited, but still very high profit opportunities if the individual value breaks down or the whole market comes to a halt.
Like almost all options, Covered Puts are also hidden. The factor usually moves with a value between 100 and click for source an 400 with the index development. The factor of the lever also depends on other factors. This includes the volatility of the individual value, but also the secondary value decline, which must be taken into account for a classic option. The ratio between the performance of the underlying and the lever factor can be determined relatively easily. Only the most recent price developments have to be divided.
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How to buy Covered Puts
First of all, the investor decides for a stock, which he believes is currently trading too high. He then determines the lower price at which which agree with he would like to purchase the value. The next step is to check the prices for the put options, which are offered for the desired price level.
If a share is about 20 euros, which the investor wants to buy for 15 euros, he looks for a put option for the desired price. He chooses this with a fixed expiration date, which is as far as possible in the future. Instead of dealing with shares, trading now takes place with options, whereby the shares are traded in bundles of 100 from this source the each.
Once the contract has been concluded, the investor undertakes to purchase the share package at the intended price. In the meantime he see here now say is in the role of a steward. This results in a margin requirement for the broker. In the case of open-ended trading, however, this is not a fraction of the total volume of shares, but a fraction of it. If the value of the share is as expected by the investor, the share will benefit from the put premium.
If the target price for the share is reached, the corresponding package is taken over by the investor. He was thus able to achieve his goal of acquiring the stock at a favorable price and in the meantime earned money with the contract. If the targeted entry price is reached, the investor may, will you could look here as an alternative, also terminate his option and realize the profit or loss incurred by him.
What are the advantages and disadvantages of Covered Puts?
The clear advantage of