What is a Covered Put & How to Trade it?
HTML-код
- Опубликовано: 2 окт 2024
- Subscribe to our Second Channel: @tastylivetrending
Check out more options and trading videos at www.tastylive.com!
======== tastylive.com ========
tastylive is a real financial network, producing hours of live programming every day. Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade. With over 120 original segments, and over 25 personalities, we’ll help you take your trading to the next level, whether you are new to trading or a seasoned veteran.
Follow us on Twitter: tastyliveshow
Check out our Instagram: tastyliveshow
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read all applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure(www.theocc.com...) and the Futures and Exchange Traded Options Risk Disclosure Statement(assets.tastywo....
Past performance is not indicative of future results. Performance is not presented net of all commissions, fees, and expenses. Multi-leg option strategies incur higher transaction costs than single leg trades as they involve multiple commission charges. Examples provided are for illustrative, informational, and educational purposes only and are not intended to be reflective of results you can expect to achieve. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request.
tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.
tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with tastylive whereby tastytrade pays compensation to tastylive to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of tastylive by tastytrade. tastytrade and tastylive are separate, but affiliated, entities with their own products and services. tastylive is the direct parent company of tastytrade.
4:15 selling Put = _obligation_ to buy, not right
I don’t think that saying “undefined” risk carries enough weight. It is a truly unlimited/infinite risk if the stock price goes up or if there is a squeeze. Overall good explanation of the topic.
I thought I understood this stuff until this but I'm completely lost on this one.
Donny H Lmao it’s just like the put version of a covered call. With a covered call, you buy 100 shares of the stock and sell a call. With the covered put, you short 100 shares of the stock and sell a put.
Chace Bonanno Wym short 100 shares of the stock and then sell a put.. couldnt u just sell the put, collect the premium, and then have enough of the collateral necessary incase the buyer decides to exercise the option once it falls below the strike price and then have you forced to buy the stock at that strike?
@@brwnstn6542 It's about mitigating risk. A naked put is still a bit more risky. I personally just stick to cash covered puts, but this strategy is better than selling naked puts.
this strategy means shorting as in stock that you don't have! That is super risky, if stock price goes up! You'll get margin call... Well, margin call for $5 increase won't be much for one or two contracts, but shorting stock also has other costs (e.g. you'll have to pay dividends to the stock owner, interest..) .. and definitely not do this for high priced stocks, Tesla, Amazon, Shopify, etc... Those can go up double digits even close to triple digits in a month!
ditto. not the best explanation video.
so for example, if I buy a put and then i sell that put at a higher ask/bid price is this a covered put?
What's the difference from this and just selling a naked call?
Selling a put is bullish
Why is the chart horizontal, not vertical? The price goes up and down, not left and right.
His y axis is the profit.
Thanks.
Nicely done... As crazy as it sounds I would rather do cash covered (naked) put and own the shares.
But the Cash secured puts have a bullish assumption: you are hoping the stock goes up in value. The covered put is the opposite
hi mike! i was under the impression that shorting (selling) a put was a bullish assumption...
It certainly is!
We would see the most profit from a put sold if the stock price rises, but it is also profitable if the stock price doesn't change at all, or even comes down a little bit. As long as the put options is out of the money at expiration, it will be worthless and the credit received on trade entry would then be profit.
Which options strategy works better when you own shares?
Covered calls
Your timeline is moving left? (green arrows to the left) I cannot make heads or tails of your graphic. You're covering too much material without supporting graphic.
Sorry about the confusion with this! The green arrow was meant to signify profit levels if the stock price went down. It is a typical P/L graph of a covered put, where the profits are capped at the short put strike we sold.
The Unlimited Loss part is a little scary. Probably why I do not do them.
There is no unlimited loss
Max loss is 100x the strike price. You get assigned the shares and they go to zero. Not unlimited
I love Mike and his whiteboard
Put Credit Spread
This aged nicely with the stock mayhem right now
What I didn't see was the fee added for the put option. That should be considered on your break even calculations
Thanks for your feedback - I will consider that for the future!
Plus dividend charge for div paying stocks!
Don’t you have to pay for a locator fee/interest for shorting stock ?
Trol board
Mike, who farted at 2:04?
that was me, I'm under your bed :p
4:13
was wondering why there was no strategy for covering a short put on long stock, but it looks like it's because the loss would double in comparison to a covered call. Mind you if you do a short put on stock the upside would be unlimited. ALso makes me wonder about a short put and call covered with the same stock is that possible?
That's correct - a short put just gives you another 100 shares of long exposure at the end of the day if it's ITM at expiration. If that's your goal though, it could be a nice way to become long shares at a lower price than the market.
Selling a put AND a call is known as a covered strangle. You have no risk to the upside still, but have the ability to layer into more shares if the short put goes ITM and you take the shares at expiration.
Sorry, but you are very confusing for me, I don't think it made any sense, you made good efforts although
You have to understand how short selling works.
Maybe I'm wrong but coverd put is only good for INVESTORS betting on volatility?
what?
I assume because you are talking about shorting, you would choose the covered 'sell' put option on the tastytrade app as opposed to the covered 'buy' put?
Man, when you use words that I don't understand to explain other words I don't understand 😕
Mike explained it very well. The problem is that you guys don't understand how short selling works. If you did, it would make sense to you.
Help please. I got flat footed and failed to close a naked call position (TSLA @ 1500). 200 shares short were assigned. Now I'm in damage control mode. My concern is margin call/gap up soon. Would you suggest a covered put strategy? If so what strike prices/exp suggestions. REALLY would appreciate it. I feel like a dummy.
A covered put would help reduce basis on the shares - the expiration and strike is totally up to you, I just wouldn't go above the breakeven price of the trade in general. That can lock you into a loss while you still hold undefined risk on the upside. We try to avoid selling premium in the earnings cycle for a regular trade like this, so I'd likely check out some expirations prior to the announcement which is coming in the next few weeks. Totally up to you though!
What does it mean “Roll put up”
Rolling a put up refers to closing (buying back) the current put strike, and opening (selling) a new one closer to the stock price. This adds extrinsic value, and improves the upside breakeven of the short shares.
Hello, if I made a really wrong operation; I bougth 100 shares at $20 each $2k position now shares dropped to $10 each so $1k loss;
and I didnt used stop loss neither covered with a put. With operation with options could I do to minimize my loss? apart from selling a covered call.
Hello!
It's difficult to hedge after the fact, which is why we typically enter into covered calls from the beginning so we don't have this scenario. If I'm comfortable owning more shares, I may sell a put and take more downside risk, which will help add some positive theta to the trade, and if I take more shares at the lower strike, that reduces my average cost basis on the shares pretty significantly. Outside of that, not much that I would consider personally.
Totally up to you though!
Can you do a Poor Man Covered Put?
Good one, liked it. 👍
Can I ask how are you shorting the 100 shares at 75? Are you buying 75p or selling 75c? while still selling another 65p to reduce cost basis or improve BEP.
In this example, I am talking about literally shorting shares from the beginning. You can short shares without utilizing an option.
@@tastyliveshow Thank you for your reply! However could you explain how to mechanically short shares? Like what do I do physically on a broker platform to achieve that? I understand a covered call cos you just long the 100 shares by buying them, but I don't for covered puts haha, cheers!
@@FadingDream You have to put in a request to your broker to open a margin account & to short sell stocks. Both requests have to be approved by your broker.
Your graphics were a bit confusing, i would recommend making more simple charts and verbally covering that content, and moving onto another chart. Also, the obligation to buy is VERY different than the right to buy. Please be mindful of your script for future videos as watchers could get confused
wat is IV?
IV = Implied Volatility
Thank you!
this may sound like a bad quesion but you don't have to sell short the shares to also sell the puts right? how would it work if you owned the 100 shares , sold the put...then if stock price goes higher you would keep the premium and the hundred shares as well.. if stock price went below the strike you would lose the 100 shares but keep the premium .. correct?
You do not have to short shares to also sell the put. You need 100 short shares to REMOVE the risk in the short put, which is why this is called a "covered" put. the -100 shares cover the risk in the short put. In a covered call, the +100 shares cover the risk in the short call.
If you owned 100 shares and sold a put, I think the best way to think about that is using the short put to potentiall get into more shares at a lower stock price via the strike chosen in the short put. If the stock goes up or stays the same, you keep the shares and keep the premium.
if the stock goes down below the short put at expiration, you still have the 100 shares, but now you get 100 more with the short put strike, plus you get to keep the premium, creating a dollar cost average effect against your original shares.
This is not a bearish position. A covered call is a bearish position. A covered put is a bullish position. Max profit is achieved as the underlying rises.
4:18 selling a put doesn't give you the right to buy. If you're assigned the put option you'll likely be losing money, sheesh...
You've got these flipped - a covered call is a bullish position and a covered put is a bearish position. Max profit is achieved if the underlying rises on a covered call. The gains on the long shares would outweigh any potential losses seen on the short call.
Technically it gives you the obligation to be put shares, but for a lot of people selling puts they're happy owning shares at the lower price. You could see a marked loss due to extrinsic value increasing, but at the option's expiration there is no extrinsic value, so you're left with intrinsic value. You could very well be profitable, but even if you're not, you can now own the shares at a lower price than if you had bought them at the beginning of the trade, where you'd surely be at a much bigger loss.
Dude your way out of line. Buying a covered call is a long position. If the underlying rises you make money. If you sell a covered call it's the exact opposite of buying a covered call, a short position in which a falling underlying is Max profit... Sheesh guy when you sell a covered call the last thing you want is the underlying to rise. When you sell a covered put, exact opposite. OWNING THE UNDERLYING is a long position, selling a covered call on that which you own is a short position. It's a hedged but, not a long position. Jesus Christ help us all.
Bet*
Wtf. What.
Simply the best explanation