How to Buy stocks using Options (Short Put)

If an investor wants to buy stocks, a better way to do it is Selling Put options.

What are Put options?
A put option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price (called Strike Price) within a specified time (called Time to Expiration). This is the opposite of a call option, which gives the holder the right to buy shares.

The investor can either buy or sell options. We will focus on selling options in this example.

Selling a Put option will obligate the investor to buy the stocks at the strike price if by expiration the current price of the stock is lower than the strike price. In this example, the investor is bullish on the stock and already wants to buy them, but would prefer to buy them at a better price. If that's the case he can sell put options and receive a premium, until he gets assigned.

Let's say TraderX would like to buy 100 stocks of AXP ( American Express ), right now is trading at $100.96. TraderX thinks that the $96.5 level which is the monthly S1 Pivot would be a good resistance point and would like to get long if the stocks retrace back to that price.

TraderX can sell 1 Put option (1 option contract = 100 shares) with a strike price at 96.50 with 47 days to expire for a credit of $1.05.

If the Stock doesn't go back down during the next 47 days (Days to Expiration), TraderX keeps the $1.05 premium and makes $105.00 ($1.05 x 100). If it goes down below 96.50, the option is In The Money ( ITM ) and will get assigned at expiration. However, TraderX will keep the $1.05 credit regardless making his effective price or cost basis $95.45.

By using Options, the investor will get the following benefits:

1. Making profits, even if the stock never gets to his price.
2. Buying low, relative to the price where the stock currently is.
3. Improve his probabilities of profit. Since the investor is receiving a credit, the trade is no longer a 50/50 shot (In essence he get's a headstart).
4. Reduce his cost basis, since he keeps the Credit received (In this example $1.05, which is over 1% lower from his original price).
5. If the option expires, the Investor can just keep selling options and getting paid until he gets assigned, or no longer wants to be bullish on the underline.
Just started my Youtube Channel Check it out:
This is actually a good idea. We should help educate some traders that might only buy/sell the underlying on how they can create strategies with options.
@Benji, 100% agree. Tradingview needs more information on options. I am gonna try and post more educational post, and hopefully, more people start taking advantage of them.
ZH 简体中文
EN English
EN English (UK)
EN English (IN)
DE Deutsch
FR Français
ES Español
IT Italiano
PL Polski
SV Svenska
TR Türkçe
RU Русский
PT Português
ID Bahasa Indonesia
MS Bahasa Melayu
TH ภาษาไทย
VI Tiếng Việt
JA 日本語
KO 한국어
ZH 繁體中文
AR العربية
HE עברית
首页 股票筛选器 外汇筛选器 加密货币筛选器 财经日历 如何运作 图表功能 网站规则 版主 网站 & 经纪商解决方案 插件 图表库 功能请求 博客 & 新闻 常见问题 帮助 & 维基 Twitter
概述 个人资料设置 账号和账单 我的客服工单 联系支持 已发表观点 粉丝 正在关注 私人消息 聊天 退出