"Knowledge
is Power!"
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"Knowledge
is Power!" |
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Option Basics | Option
Strategies | Trading Strategies
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The Married Put
An investor purchasing a put while at the same time purchasing an equivalent number of shares of the underlying stock is establishing a "married put" position - a hedging strategy. When to Use? The investor employing the married put strategy wants the benefits of stock ownership (dividends, etc.), but has concerns about unknown, downside market risks. The primary motivation of this investor is to protect his shares of the underlying security from a decrease in market price. He will generally purchase a number of put contracts equivalent to the number of shares held. strategy : directional and bullish
Establishing a bull call spread involves the purchase of a call option on a particular underlying stock, while simultaneously writing a call option on the same underlying stock with the same expiration month, at a higher strike price. Both the buy and the sell sides of this spread are always the same number of contracts. This spread is sometimes more broadly known as a "vertical spread": a family of spreads involving options of the same stock, same expiration month, but different strike prices. When to Use? An investor often employs the bull call spread in moderately bullish market environments, and wants to capitalize on a modest advance in price of the underlying stock. An investor will also turn to this spread when there is discomfort with either the cost of purchasing and holding the long call alone, or with the conviction of his bullish market opinion. strategy : Moderately bullish |
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