Comments by "" (@money2024) on "Nio Stock Still A Buy? - Top EV stock | Robinhood Investing" video.
-
6
-
If you sell a put, say for $1.20 ($120) with expiration of July 24, and some time goes on and now it's July 22nd, and say it's now worth $0.40 ($40), you can buy back that same strike price contract for the new price of $40, essentially securing the difference between them. $120-$40= $80 profit. You can always buy to close out, but that doesn't mean you'll always profit from buying back.
There could be a scenario where you sell a put that is $1.20 but the price of the stock is dropping and getting closer to your chosen strike price, and you're worried the price will drop below your strike price (then you'd have to buy 100 shares) so maybe you want to get out so you don't have to own 100 shares. Well then you'd buy the contract at whatever the premium is. So say it was $1.20 when you bought it, but now the price of the stock dropped below your strike price, you can get out by buying back at say $1.60. So you'd lose $40 because you sold for $120, but bought for $160. You might do this for a couple reasons, but the main reason would be so you don't have buy 100 shares of the stock.
3
-
2
-
1
-
1
-
1
-
1
-
1