Short Put
Investor use short put when he is bullish on market direction and bearish on market volatility. A long call is simply the purchase of one call option.
Market Scenario: Bullish on market bearish on volatility
Risk: Unlimited
Reward: Limited to premium
BEP: Strike + Premium
EXAMPLE:
Entry:
| SPOT | 5000 |
| | STRIKE | PREMIUM |
| SELL PUT | 5100 | 50 |
BEP = 5100 - 50 = 5050
On Exit if:
| SPOT | PUT PAY-OFF | PREMIUM | STRATEGY PAY-OFF |
| 4800 | -300 | 50 | -250 |
| 4900 | -200 | 50 | -150 |
| 5000 | -100 | 50 | -50 |
| 5050 | -50 | 50 | 0 |
| 5100 | 0 | 50 | 50 |
| 5200 | 0 | 50 | 50 |
| 5300 | 0 | 50 | 50 |
| 5400 | 0 | 50 | 50 |
| 5500 | 0 | 50 | 50 |
