May 30th, 2007 | 
Author: 
If you already decided to buy stock, why not buying it at discount?
No prior knowledge required, just the basics.
Before we start, we need to level up the knowledge to all the readers.
Option – is a contract that the buyer has the right but not the obligation to exercise.Basically we will discuss the stock options.
Put option – The buyer of this contract has the right to sell the stock to the seller (writer) of this option.
Put at the money: the exercise price is equal or close to the stock Price it the market.Lets say if the stock price is $25.6 then the at the money strike will be 25.
Put time to expiration- this is the time left for this contract to exist.At this time, ether you exercise or receivemoneyif your option is in the money it has an intrinsic value.
Put option price rise when the stock drops.
Basic behavior of the option pricing, when the stock goes down The price of the option is inflated (implied volatility rises).It means that in addition of the rise in intrinsic value of the option, It also inflated because of the uncertainty.
Trade tactics, test case: (ANDE)ANDERSONS INC.
Lets say you followed this stock and you think that it reached to it lowest level.
And you want to buy the stock the price of $35.2 (june23, 2008).
One alternative buy at $35.2.
Second alternative is selling at the money put.
When you sell a put and have the money to buy the stock you are covered.
By selling the put option at strike of 35 you will receive its premium, $1.65.
It means if you will get exercised you will have to buy the stock at the price of $35.
And if it does happen it means you bought the stock at discount of about $1.65.
In terms of percentage 1.65/35.2 = 4.5% discount.
And if you haven’t gut exercised you will get to keep the premium.
So as you see, it is not risky to sell options, if you know your craft.
Please read the disclaimer on options trading before you trade.
Click to study more and
By: Nissim Levi
About the Author:
No prior knowledge required, just the basics.
Before we start, we need to level up the knowledge to all the readers.
Option – is a contract that the buyer has the right but not the obligation to exercise.Basically we will discuss the stock options.
Put option – The buyer of this contract has the right to sell the stock to the seller (writer) of this option.
Put at the money: the exercise price is equal or close to the stock Price it the market.Lets say if the stock price is $25.6 then the at the money strike will be 25.
Put time to expiration- this is the time left for this contract to exist.At this time, ether you exercise or receivemoneyif your option is in the money it has an intrinsic value.
Put option price rise when the stock drops.
Basic behavior of the option pricing, when the stock goes down The price of the option is inflated (implied volatility rises).It means that in addition of the rise in intrinsic value of the option, It also inflated because of the uncertainty.
Trade tactics, test case: (ANDE)ANDERSONS INC.
Lets say you followed this stock and you think that it reached to it lowest level.
And you want to buy the stock the price of $35.2 (june23, 2008).
One alternative buy at $35.2.
Second alternative is selling at the money put.
When you sell a put and have the money to buy the stock you are covered.
By selling the put option at strike of 35 you will receive its premium, $1.65.
It means if you will get exercised you will have to buy the stock at the price of $35.
And if it does happen it means you bought the stock at discount of about $1.65.
In terms of percentage 1.65/35.2 = 4.5% discount.
And if you haven’t gut exercised you will get to keep the premium.
So as you see, it is not risky to sell options, if you know your craft.
Please read the disclaimer on options trading before you trade.
Click to study more and
By: Nissim Levi
About the Author:
Nissim Levi is the a cofounder of Asio-Trader ltd.
Practicing over a decade Portfolio management.
In the last 8 years developed an “ARTIFICIAL INTELLIGENCE” system, that
studies thousands of stocks, Picks candidate for trading and trades automatically.
Nissim is an expert in large volume of option trading.
Click to study more and free stock picking
http://www.asio-trader.com
Jonas Booher
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