What is a credit spread, how does it work, and why would you use one? A simple introduction to credit spreads, risk, reward and how they differ from selling cash-secured options.
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When a cash-secured put is assigned, the put seller must buy 100 shares per standard option contract at the strike price. Operationally, five things happen: 1. The short put position disappears from the account. 2. The cash securing the put is used to pay for the shares. 3. One hundred shares per contract are purchased at the strike price. 4. The investor becomes an ordinary shareholder. 5. The premium originally received for selling the put remains theirs. The last point causes a surprising amount of...
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A beginner-friendly guide to options trading, covering cash-secured puts, covered calls, option premiums and how selling options can be used to generate income.
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