I've only ever sold covered calls but I want to dip my toe into other options. I'm long and way up on pltr. I just sold to open a $30 Sept 20th put for $138 when the stock was around $30.30.
I just want to make sure why understanding is correct. If pltr goes higher, I pocket $138. End of story.
If it goes below $30, I'm buying 100 shares for $3000 less the $138 I've already received. I'm happy to add 100 shares for $28.62.
So my max exposure is $2862 if pltr went to zero.
Is my thinking correct?
Posted by freenessness
3 Comments
You are correct. CSP’s are used to get the shares at a discounted price when you’re long. You can even add to that by running the wheel, but it doesn’t seem you’re that advanced yet. You’re right process was correct. If you ever want to pick my brain feel free to message me. I sell options for a living.
Yes you have it basically correct with your numbers. A little nuance on timing: if the price goes below strike, the buyer won’t necessarily exercise right away. If it expires below strike then you’ll be assigned – or, the buyer can opt to assign early. (I just experienced this today with some $30 ASTS puts, same situation as you – it went below but I haven’t been assigned to buy yet). Also maybe this is obvious but the $138 is already yours to keep end of story and it should be in your account. You’ll be obligated to buy for $3000 and most traders think of the premium as included the basis, so then $2862 is correct.
Since you are a begginer, check this link with free links in the web if you are willing to increase your knowledge on options trading: [https://www.myoptionsedge.com/33-blog-articles-every-options-trader-must-read](https://www.myoptionsedge.com/33-blog-articles-every-options-trader-must-read)