Bullish outlook - buying stock using ITM put options
Strategy: selling an in-the-money put option
- Trade setup:
- Action: SellToOpen
- Quantity: 1
- Expiry: 15-Sep-2024
- Strike: 550
- Premium: $18.90 (per share)
- Premium and risk:
- Premium received: $18.90 x 100 (per contract) = $1,890
- Max risk: Significant (potential obligation to buy the stock if it falls below the strike price)
- Max reward: $1,890 (retained premium if Adobe stays above 550 at expiry)
- Breakeven point: $550 (strike) - $18.90 (premium) = $531.10
- Comparison with buying stock: This strategy can potentially allow you to acquire Adobe stocks at a discounted rate compared to the current market price, with the added benefit of premium retention