Showing posts with label create. Show all posts
Showing posts with label create. Show all posts

the investor

To create  a more advanced strategy and demonstrate the use of put options in practice, consider combining a put option with a call option.   This strategy is known as a straddle and consists of buying a put option as well as going long a call option. 
 In this case, the investor is speculating that the stock is going to have a relatively significant move either up or down.

The above put option strategies can be combined with a vast array of more exotic positions, but should provide a good introduction to the basics.
An investor can also short, or write a put option.  This lets him or her receive income in the form of receiving the option price and the hope is the stock remains above the strike price.  If the stock falls below the strike price, the put writer has the obligation to buy the stock  from the put option holder. 

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