Option Selling
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Option selling has become more main stream recently as more and more retail traders learn about the various option spread trading strategies which can provide actually quite impressive returns over short periods of time.
Option selling is the act of an investor ’selling’ an option - either call or put - to bring a credit into their account. The trader doesn’t necessarily have to own the option prior to selling it - or even own a related base asset such as the stock that the option is derived from (such as is the case with covered call selling)
Even though the investor may not need to own the option first - or a related asset - in most cases the investor DOES need to have enough cash in their account to ‘cover’ the sold option if it were assigned - or they could also cover it by purchasing another nearby option - such as would be done in the case of a credit spread option position - or a debit spread.
Some popular option selling strategies include:
Iron Condor
Credit Spread
Butterfly Spread
Option selling is a great way for investors to benefit from the fact that options are a decaying asset.
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