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For this right, a premium is paid to the dealer, which can vary relying on the variety of contracts bought. A married put is an options strategy the place an investor, holding a long place in a inventory, buys a placed on the inventory to imitate a call possibility. A short name is a technique involving a call option, giving a dealer the right, however not the obligation, to promote a safety. Because of the chance concerned, solely experienced options traders ought to write bare places.
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The margin requirements are sometimes quite excessive for this strategy as well, because of the propensity for substantial losses. The maximum loss, in the meantime, is theoretically important as a outcome of the value of the underlying security can fall to zero. The larger the strike price, the higher the loss potential. Samantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California life, accident, and medical insurance licensed agent, and CFA. She spends her days working with hundreds of workers from non-profit and higher training organizations on their personal financial plans.