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difference between the strike of the option and the premium received through
the sale of the put ($30-$6=$24). If the stock closes at $19 on expiration, there
would be a $5 loss ($30-$19-$6=$5 loss). The maximum profit an investor can
receive is the credit received when selling the option. For example, if the same
XYZ 30 strike put option sold for $6, and the stock closed over $30, the option
would expire worthless, and the investor could pocket the entire $6. The break
even point for the strategy occurs when the price of XYZ is at $24.
Commissions, taxes, and transaction costs are not included in any of these
strategy discussions, but can affect final outcome and should be considered.
Please contact a tax advisor to discuss the tax implications of these strategies.
Many of the strategies described herein require the use of a margin account.
With long options, investors may lose 100% of funds invested. In-the-money
long puts need to be closed out prior to expiration, since exercising them could
create short stock positions.
Options carry a high level of risk and are not suitable for all investors. Certain
requirements must be met to trade options through Schwab. Multiple leg options
strategies will involve multiple commissions. Please read the options disclosure
document titled "Characteristics and Risks of Standardized Options." Member
SIPC
Buy-Write & Unwind
Of the kinds of multi-legged orders that can be placed ‘as a package’ using this
feature, buy-writes and unwinds are unique in that one leg of the trade is for an
option, the other is for an equity. Because one leg trades on an option exchange
and the equity leg on a separate, equity exchange, the circumstances in which
the ‘Net’ price indication will be better than the prices for the separate legs combined will be uncommon. (Please note the indicative prices are not firm quotes
and may not be available when an order is sent for execution.)
Copyright © 2010-2015 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. (1015-6153)
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