LogFAQs > #960588089

Menji posted...

This is the kind of thing I want to do. Can help me understand what this is called so I know what to select?

Is this the one where you're either going to get shares at low price if the price goes up or overpay if the price stays down? So it's fine as long as you're okay with owning more shares?

No. What you're talking about is a sold put. I am buying the ability to buy 100 shares of FUBO at $20 a piece through May. If it stays below $20 through May I lose money as there is no value to buying them at $20 if the stock price is below $20. On the flip side if it goes up to $30 I basically reserved my ability to buy them at $20. (and can just sell the contract outright for $1000 +-- 100 x the difference in strikes)

If you want to do what you're describing, under e-trade you'd do "sell open" and then pick the strike at the price you're willing to buy the stock at. So if you were to sell a $20 put on FUBO, the outcomes are as follows.

1. You get the premium up front, but also put the money up front to buy 100 shares (so $2000 for a $20 put)
2. At any time you can be forced to buy the shares for the strike you sold it at, but generally early exercise won't happen.
3. If it finishes below $20 by the time the contract expires, you are assigned the shares at $20 per share. Otherwise you keep the premium and don't get the shares.

I also think that's a good play but upside is limited. I'm expecting a harder bounce which is why I'm purchasing calls.

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No problem!
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