Option Strategies
Module Units
- 1. Introduction
- 2. Why Trade Options?
- 3. Option Chain
- 4. Option Strategies
- 5. Options Buying Vs Option Selling
- 6. Long Call
- 7. Short Call
- 8. Long Put
- 9. Short Put
- 10. Long Call Vs Short Put
- 11. Long Put Vs Short Call
- 12. Bull Spread Strategy
- 13. Bear Spread Strategy
- 14. Call Ratio Back Spread Strategy
- 15. Put Ratio Back Spread Strategy
- 16. Hedging Strategy - Covered Call
- 17. Hedging Strategy – Protective Put
- 18. Collar Strategy
- 19. Straddle
- 20. Strangle
- 21. Strip Strategy
- 22. Strap Strategy
- 23. Butterfly Strategy
- 24. Modified Butterfly Strategy
- 25. Long Condor Strategy
- 26. Conclusion
Long Put
Since we have already explained a ‘Long Call’ earlier, let us now understand a ‘Long Put.’
A long put involves buying a put option. It is a bearish strategy. A long put strategy is associated with unlimited profit potential and limited losses or risk to the extent of the premium paid. A trader profits from a long put strategy when the underlying asset falls below the strike price.
A long put normally increases in value from a decline in the underlying stock or volatility expansion. It declines in value from a rise in the underlying stock, time decay, or volatility contraction of the underlying asset.
Below is the illustration of the payoff diagram of a Long Put Option:
The key to becoming a successful option trader is to select the best strike price and time frame to match your risk profile and goals.
The lower the strike price of a put, the premiums are lower. And the lower the delta, the greater is the leverage. At-the-money (ATM) and Out-of-the-money (OTM) options seem lucrative for put option buyers, when they are bearish on the underlying asset or the overall market.
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