Selling Microsoft Put Option Explained
"What I'm being told is, 'Paul, if you want the stock at 350 per share, someone will pay you $3.41 per share.' So, what this means is if on July 17th, the stock is above 350, I just keep my 341, I don't get the shares. If it falls below 350, I pay 350 for the stock, but I still keep my 341. So, essentially, I paid 346.6 for the stock because it's my 350 minus my 340."
ℹ️ In shortThe speaker explains that by selling a put option on Microsoft, he receives a premium, and if the stock price drops, he buys the shares at a lower effective price.
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… The stock's currently at 375. We saw my price is basically 348. Let's call it 350. So, I go to our options chain in our software. What I'm going to do here is I'm going to pick a date in the future that I want to own the stock at. I usually go a month or two out. So, let's go to July 17th, 2026. Here's the put side, here's the call side. What I'm being told is, "Paul, if you want the stock at 350 per share, someone will pay you $3.41 per share." So, what this means is if on July 17th, the stock is above 350, I just keep my 341, I don't get the shares. If it falls below 350, I pay 350 for the stock, but I still keep my 341. So, essentially, I paid 346.6 for the stock because it's my 350 minus my 340. So, you might be wondering, "Oh, that's pretty cool." But even more cool, right now the cash in my accounts are in US Treasuries. 90-day Treasuries making around 3.7%. If I did this over and over for an entire year, I'd make 12.2% per year on my cash. That's assuming I never get the stock. But that's what I want to look at. Like am I getting a dec …
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