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Options Trader Pro
Advanced Trading Strategies for Big Profits in Any Market

Education: Put-Write

Education: Put-Write

We are likely going to initiate a put-write today and I wanted to follow up with a bit more information.

First off, since it will be our first put-write, we will likely start with a low-priced or low-volatility stock, which “should” limit our downside if the trade goes against us.

Second, in order to initiate a put-write, you need to have the funds in your account to cover the potential purchase of the stock. For instance, if you sell one XYZ 20 put, you need to have $2,000 in your account. Why? Because if stock XYZ goes below 20 on the put’s expiration, you will be forced to buy 100 shares of stock XYZ at 20. The math behind this is 20x100=2,000.

If this is your first put-write, I suggest that you do the trade with only one or two contracts and watch how it plays out. There will be plenty of opportunities to put such trades on in the future.