Bull Put Spread
नमस्कार मित्रो। एंजेल वन के इस podcast में आपका स्वागत है ।
The beauty of the stock market is that there are many, many ways of making money there. If you're looking to supplement your income, you can invest in large-cap stocks with a track record of providing stable returns. If you are looking to make the stock market your main source of income, you can become a day trader.
If you'd like to take greater risks in exchange for the chance of making greater rewards, you can do that too. Koii company ka value badd raha hai, toh aap usme invest karke paise kama sakte hai. Agar koii company bankrupt ho rahi hai toh aap uska stock short karke bhi paise kama sakte hai!
The opportunities are endless. But no matter what opportunity you choose to pursue, you always need a strategy.
There is something for everyone on the stock market. In this podcast, we will discuss a strategy that can be great for people who are risk averse. This strategy is called bull Put spread.
Inn teeno words ko samajte hai.
Bull matlab ki aap jo stock par put options khareed rahe ho, wo stock par aapka outlook bullish hai. That is, you expect the price of that stock to go up in the future.
Secondly, put option is one of the two types of options, the other being call options. Generally, put option is bought when your outlook is bearish on the stock. That is why some people find the idea of a bull put spread confusing. But at the end of this podcast, you will see what this strategy is all about, and how it allows you to take low-risk bets on stocks you're confident about.
To put a bull put spread strategy into action, you will buy a put option, and sell another put option. Ye baat note karne jaisi hai ki aap same stock ka hi put option khareedenge aur bechenge. Further, both the options will expire on the same date.
For this strategy to work, the premium you get for selling the put option needs to be higher than the premium you pay to buy the second put option. The difference of these two premiums will be the upper limit of your profits, as well as the upper limit of your losses.
You need to take care of one more detail. The strike price of the put option you sell must be higher than the strike price of the put option you buy. Why this is the case will become obvious through the following example.
Let's imagine you expect the price of the reliance stock to go up. Ye bhi maan lijiye ki reliance ke stocks ka current market price 1000 rupees hai. This is how you can put a bull put spread strategy in action.
First you buy a put option on the reliance stock with a strike price below the current market price. Let's suppose the strike price is 900 rupees. You will pay a small premium since this put option is currently out of money - which means that if you exercised it, you would lose money. If, in the future and before the expiry date, the market price dips below the strike price, you will make money. If it stays above, you won't. But wait. Poora picture abhi baaki hai.
There is an important second step. You must now sell a put option on the same stock, with the same expiry date, with a strike price that is higher than the current market price. Maan lijiye ki aapne 1100 ki strike price waala put option bhecha. Iss put option ka buyer aapko premium dega, and this premium will be high since the buyer can actually exercise the put option immediately and recover most of the premium.
The difference between the high premium you get, and the low premium you pay, will be the upper ceiling for both your profits and losses.
Let's consider a scenario where you earn maximum possible profits.
Ye scenario tab sachayi banega jab aapka bullish outlook sach hoga. If the stock price for reliance increases, and goes above 1100 rupees, then the party that bought the contract from you will not exercise it as they will actually have to buy it at the market price, which is higher than 1100, and sell it to you at 1100, which was the strike price. So they will lose not only the premium they paid, but also the difference between the current market price and the strike price.
As mentioned above, aapka profit incoming premium and outgoing premium ka difference hoga. Ab aap soch rahe honge - wo jo put option khareeda tha, uska kya faayda mila? Wo toh sirf premium kata hi. By only selling one put option, can we not increase our profit margins?
The answer is simple: we definitely can, but that will expose us to huge risk. Let's understand how.
By selling a put option, you stay in the profits if the market price goes above the strike price and stays above. If the market price is below the strike price, then you can stay in the profits as long as the difference isn't more than the premium you got for the deal. The moment the gap becomes bigger than the premium, you start losing money.
This is where the put option, that you bought, comes into the picture. In this contract, you make a profit if the market price drops below the strike price. Therefore, if that happens, the profits from this deal perfectly wipe out your losses from the other deal. Quite literally, for every rupee you lose, you earn a rupee, thereby freezing your losses at a constant number.
As discussed before, this constant number is the difference between the premium paid, and the premium obtained.
This is the magic of the bull put spread. Potential losses ka ek secured upper limit hai, aur healthy profits can acha possibility hai.
Please note that this podcast isn't a recommendation for buying or selling options on the reliance stock. The example was used for illustrative purposes only.
चलिए, एंजेल वन की तरफ से आपको आज के अलविदा. ये podcast शेयर करना ना भूलियेगा - याद रखियेगा की ज्ञान बाटने से बढ़ता है । और फिर अंत में तोह financial markets एक ऐसी university है जिसमे कोई professor नहीं, सब students ही है ।
नमस्कार मित्रो। एंजेल वन के इस podcast में आपका स्वागत है ।
The beauty of the stock market is that there are many, many ways of making money there. If you're looking to supplement your income, you can invest in large-cap stocks with a track record of providing stable returns. If you are looking to make the stock market your main source of income, you can become a day trader.
If you'd like to take greater risks in exchange for the chance of making greater rewards, you can do that too. Koii company ka value badd raha hai, toh aap usme invest karke paise kama sakte hai. Agar koii company bankrupt ho rahi hai toh aap uska stock short karke bhi paise kama sakte hai!
The opportunities are endless. But no matter what opportunity you choose to pursue, you always need a strategy.
There is something for everyone on the stock market. In this podcast, we will discuss a strategy that can be great for people who are risk averse. This strategy is called bull Put spread.
Inn teeno words ko samajte hai.
Bull matlab ki aap jo stock par put options khareed rahe ho, wo stock par aapka outlook bullish hai. That is, you expect the price of that stock to go up in the future.
Secondly, put option is one of the two types of options, the other being call options. Generally, put option is bought when your outlook is bearish on the stock. That is why some people find the idea of a bull put spread confusing. But at the end of this podcast, you will see what this strategy is all about, and how it allows you to take low-risk bets on stocks you're confident about.
To put a bull put spread strategy into action, you will buy a put option, and sell another put option. Ye baat note karne jaisi hai ki aap same stock ka hi put option khareedenge aur bechenge. Further, both the options will expire on the same date.
For this strategy to work, the premium you get for selling the put option needs to be higher than the premium you pay to buy the second put option. The difference of these two premiums will be the upper limit of your profits, as well as the upper limit of your losses.
You need to take care of one more detail. The strike price of the put option you sell must be higher than the strike price of the put option you buy. Why this is the case will become obvious through the following example.
Let's imagine you expect the price of the reliance stock to go up. Ye bhi maan lijiye ki reliance ke stocks ka current market price 1000 rupees hai. This is how you can put a bull put spread strategy in action.
First you buy a put option on the reliance stock with a strike price below the current market price. Let's suppose the strike price is 900 rupees. You will pay a small premium since this put option is currently out of money - which means that if you exercised it, you would lose money. If, in the future and before the expiry date, the market price dips below the strike price, you will make money. If it stays above, you won't. But wait. Poora picture abhi baaki hai.
There is an important second step. You must now sell a put option on the same stock, with the same expiry date, with a strike price that is higher than the current market price. Maan lijiye ki aapne 1100 ki strike price waala put option bhecha. Iss put option ka buyer aapko premium dega, and this premium will be high since the buyer can actually exercise the put option immediately and recover most of the premium.
The difference between the high premium you get, and the low premium you pay, will be the upper ceiling for both your profits and losses.
Let's consider a scenario where you earn maximum possible profits.
Ye scenario tab sachayi banega jab aapka bullish outlook sach hoga. If the stock price for reliance increases, and goes above 1100 rupees, then the party that bought the contract from you will not exercise it as they will actually have to buy it at the market price, which is higher than 1100, and sell it to you at 1100, which was the strike price. So they will lose not only the premium they paid, but also the difference between the current market price and the strike price.
As mentioned above, aapka profit incoming premium and outgoing premium ka difference hoga. Ab aap soch rahe honge - wo jo put option khareeda tha, uska kya faayda mila? Wo toh sirf premium kata hi. By only selling one put option, can we not increase our profit margins?
The answer is simple: we definitely can, but that will expose us to huge risk. Let's understand how.
By selling a put option, you stay in the profits if the market price goes above the strike price and stays above. If the market price is below the strike price, then you can stay in the profits as long as the difference isn't more than the premium you got for the deal. The moment the gap becomes bigger than the premium, you start losing money.
This is where the put option, that you bought, comes into the picture. In this contract, you make a profit if the market price drops below the strike price. Therefore, if that happens, the profits from this deal perfectly wipe out your losses from the other deal. Quite literally, for every rupee you lose, you earn a rupee, thereby freezing your losses at a constant number.
As discussed before, this constant number is the difference between the premium paid, and the premium obtained.
This is the magic of the bull put spread. Potential losses ka ek secured upper limit hai, aur healthy profits can acha possibility hai.
Please note that this podcast isn't a recommendation for buying or selling options on the reliance stock. The example was used for illustrative purposes only.
चलिए, एंजेल वन की तरफ से आपको आज के अलविदा. ये podcast शेयर करना ना भूलियेगा - याद रखियेगा की ज्ञान बाटने से बढ़ता है । और फिर अंत में तोह financial markets एक ऐसी university है जिसमे कोई professor नहीं, सब students ही है ।
