sell

How to Sell a Put on Etrade

this is phantom 6

and this is a video on how to sell a put

on the etrade platform so we've got

ticker here aal

for american airlines and we can see

that the underlying price is 11.94

and the extended hours price for

pre-market this morning

monday july 13th is a little bit higher

up 1.68

so what we've experienced here in the

last uh few days

has been the decline of the stock price

of american airlines you can see over

the past month we

reached a high around probably 17

give or take a few cents and now we're

back down to twelve dollars

so we've had quite a decline here um

16th to the ninth so that's a

pretty decent uh drop here fairly

quickly and of course we're in a really

volatile market right now anyway so

uh let's look at one more thing here on

the chart

we're going to see just for reference

and take a look and you can see uh

before the crash

uh the corona crash 2020 we were trading

above 25 dollars bouncing between 25 30

bucks and it looks like we're a little

bit higher than 30 further back

but i'm not too too concerned with that

because we still have a lot of uh

fundamental questions about you know

what might happen in a short term medium

term here

for the stock in the overall economy so

you can see here uh looks like uh in the

crash

lows we were chilling around uh eight

nine ten bucks

uh found pretty good support and demand

down in that range and so we're starting

to get back to that range so

historically even after the precipitous

drop

following the crash we've got somewhat

of a basis here to say you know i'm

pretty confident that that's going to

be a level where the stock isn't going

to continue to drop so if we look at

being close to that level again we're

looking at you know

probably ranging somewhere from this you

know

eleven twelve dollar range up to at

least fifteen dollars

if not you know up to twenty dollars so

we've got probably

thirty percent uh twenty five to thirty

percent of an

upside move that we're looking at here

somewhere soon so

we want to take advantage of that uh

buying options

means that we have to pay a premium when

we buy an option

and so we want to sell an option so that

we can get paid

on the premium and have theta or time

decay work in our favor

so we're going to look to sell a put

puts are

a bearish trade because when you buy a

put you're buying the right to sell

short a share of a stock at a future

date

but we're going to take the opposite

side so we're going to sell the put

which is a

bullish side of a bear trade

just stick with me here so we're going

to go out just for this example

to january 2021

just because nothing really important

about that date

just completely arbitrary so the stock

currently

is at 11.94 and remember when we looked

at our chart i'll pull it back up here

just a few months ago we were trading

not even a few months ago we're trading

up here around uh

14 16 20 range and if we go back to the

one year

25 30 bucks before the crash so what i

want to look for is i want to look for

something that

is going to give me upside potential

without risking too much on the downside

so i think that where we're at now you

know historically we've got a lot of

room to run

but again i want to get paid i don't

want to have to pay

so right now because i'm filming this

pre-market the bids and the asks

are not populated so we're just going to

go off of what the last price was and

we're going to use that one arbitrary

number

in a future video we'll talk about

spreads on options how to

potentially take advantage of playing

those spreads and profit off of that by

you know slicing off some some pennies

or even dollars depending on the

volatility of the stock and how that

correlates out to the

options so if we take a look here i

think ten dollars

was a pretty safe price bet if we wanted

to be super safe

we could look at say maybe eight dollars

[Music]

and we'll we're we're going to say

dollar 94 there so the way that this is

going to work

is i've got an eight dollar stock strike

price is eight dollars

so that means that if this option were

to be assigned

it would take place at an eight dollar

per share

strike price so what i'm going to look

at here is okay

so if the stock goes from eleven dollars

down to eight dollars and i get struck

into my option

i will get paid a dollar ninety four

per share to buy that option

at eight dollars which means that my

value my

cost of ownership is the eight dollar

strike price minus

the one dollar and ninety four cents so

my true cost of ownership

if the shares are purchased in my name

at eight dollars my true cost ownership

is six dollars and six cents

so i already have a dollar ninety four

of built-in cushion

in my position that i got paid for to be

in this position at eight dollars

stick with me here so what i'm looking

at doing here

is i'm going to look at the eight dollar

strike price and i want to

sell american airlines put so

if i'm i'm going to the bid i'm selling

it's going to load a new screen for me

here and it's going to look like

american airlines

put it should auto fill if it doesn't

just follow me here so

american airlines i'm doing a put option

i'm ignoring this i'm selling to open

so you can buy to open you can sell to

open there's two different things

just like if you buy a stock and go long

or if you sell

short a stock and you're bearish

same exact principle so i'm going to

sell to open

because i'm selling a put i'm not buying

the put i'm selling the put

and every one contract represents 100

shares

so if my limit price is a dollar 94

you can see that my proceeds

which will flow into my account

if and when the option is either struck

out or

expires is a hundred ninety three

dollars and fifty eight cents why the

why

why the difference is because the dollar

ninety four minus the estimated

commission of 50 cents you're looking at

a dollar

93 48. uh so

say that i wanted to just do this one

option

well this is exactly how i'm going to be

again i'm not playing the spreads here

so limit price dollar 94 duration good

for day

good for 60 days good until a specified

date

immediate or cancel what you don't want

to do on this fill or kill which you

don't want to do on this

so you probably just want to do good for

a day because the stock price is going

to fluctuate

a fair amount intraday you don't

necessarily want to leave that same

order on for 60 days because it'll

either

have you catch a falling knife

potentially or it will have you

basically miss an entire move by not

tracking and updating and following your

position

so this is it this is all i want to do

american airlines

i'm got a put

so there's all these different ones that

you can choose from

there's call put spreads different types

of straddles uh

all kinds of stuff animals you know

zebra mermaid people

um that are in here you can choose from

but we're doing a put

cell to open one quantity

if you want to scale this out and do 10

quantities

and here's the cool thing about this is

so now when i start scaling out my

options

i'm looking at getting paid 1

934 dollars by or before january 15th of

2021

for selling this option if this option

goes

say the stock the underlying stock price

goes from 1218 up to say

17 you would expect that the

premium for someone to buy the option to

sell the short

stock short at eight bucks would go down

because no one wants no

at seventeen dollars you've got way less

percentage chance

of hitting an eight dollar per share

option versus at twelve dollars you're

far

you're much closer so if you move up say

30 appreciation and upside value of the

underlying stock price

to 17 area then no one's going to want

to pay a dollar 94 for that they might

pay 5 cents 10 cents

at that time we can buy to close

the option back and say we put in 15

cents

it's a dollar it's 155 dollars and 16

cents

so what was our initial value here uh

thirty 1934 dollars is what we were

going to uh get credited to our account

initially

uh minus 155.16 so when we buy back the

difference

uh is going to be 1778.84

and so that would be our profit on

basically flipping premiums

uh if you know we don't wind up holding

this until expiration

so then we're going to let me go back

here to

sell open my dollar ninety-four

and i'm going to double check

american airlines put sell open 10

contracts for this example i'm just

going to use the one

i'm good on everything preview okay so

that's because i've got this

account here let me switch it to the

right one okay

you can see it's just asking me to

double triple check if you want to you

can drop down this purchasing power

uh impact screen or not

because you should already uh have done

your calculations before you get here

uh place order and obviously because

it's pre-market it's not going to hit

right away

but that's basically all that you do so

i'm gonna go ahead and cancel out of

here

because that was just an example and

again this is phantom6 thank you for

watching my video if you have any

questions feel free to reach out to me