Married put

#1
HELLO All.
I'm Srinivas.I'm in stock market for the last 3 years.Upto now i used to be a swing trader trading only in equities after taking delivery of scrips.I didn't use derivatives upto now.But in this period i studied quite a bit about derivatives theoritically.Now i want to start of with Married Put strategy initially.Is it a good idea?kindly give me some tips to do well in derivatives.I request all the senior people in this forum to assist me in this reg by providing their valuable tips and suggestions.WAITING FOR REPLY
srinivas
 
#4
It would be good if you can explain your idea of a married put.
Here is what you are looking... an intro to Married one...

The Covered Put is the opposite process to a Covered Call, and it achieves the opposite risk profile. Whereas the Covered Call is bullish, the Covered Put is a bearish income strategy, where you receive a substantial net credit for shorting both the put and the stock simultaneously to create the spread.

The concept is that in shorting the stock, you then sell an Out of the Money put option on a monthly basis as a means of collecting rent (or a dividend) while you are short the stock.

The trade-off is that an OTM Covered Put will give a higher potential yield but less cushion, whereas an ITM Covered Put will give a lower yield but much more cushion. This is not a recommended strategy (partly because its a little confusing!), but you pays your money, you takes your chances on this one!

If the stock falls below the put strike, youll be exercised and will have to buy the stock at the strike price . . . but you make a profit because youve already shorted it,so the purchase simply closes your stock position, and you retain the premium for the sold put. (Youre covered because you shorted the stock in the first place.)

If the stock remains static, then you simply collect the put premium.

If the stock rises, you have the cushion of the put premium you collected.
 

Capricorn

Well-Known Member
#5
HELLO
MY IDEA IS TO BUY SAY 100 SHARES OF SAY XYZ IN DELIVERY AND TO HEDGE IT I WANT TO TAKE AT THE MONEY PUT OPTION.
PLZ guide me whether this strategy works?[/QUOT

I think it would be better to stick to lot sizes for it to work efficiently.

In effect you are just buying insurance to protect the down side, that puts your break even further away. That's the trade off.
 
#6
I did realized I didn't read the entire thing properly.. as the subject asks about the PUT who is married :annoyed:

If this post needs real definition to what has been asked then rather than BUYING the strategy needs to SHORT the stock..

More expert inputs still awaiting I believe...
 

MurAtt

Well-Known Member
#7
Well ... both Capri and Vinnie's answer put together forms the complete answer Srinivas was looking for :D

:thumb:
 

pasha

Active Member
#8
HELLO
MY IDEA IS TO BUY SAY 100 SHARES OF SAY XYZ IN DELIVERY AND TO HEDGE IT I WANT TO TAKE AT THE MONEY PUT OPTION.
PLZ guide me whether this strategy works?
Good luck in trying it here.
You must have read this on the Net where mostly US stocks are discussed.
In most of the Indian stock options, volume is almost zero.
In months when the stock is expected to drop, put sellers are not there at all or required strike price puts will be missing.
 

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