The answer is simple: sell another option at the same time to collect some premium.

Option premium strategy

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    The other side of the coin is, those are normally the times when volatility is highest, which means protecting your production with options is option premium strategy most crucial.

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    So the question becomes, how does one cheapen up these pricey options? The answer is simple: sell another option at the same time to collect some premium.

    To boil it down, an option spread involves buying a certain type of option a put lionstone binary options demo account a callwhile simultaneously selling the same type of option with a different strike price.

    To put a nice little bow on it, a put spread gives you a window of downside protection in exchange for a cheaper entry price.

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    The exact same strategy can be employed with call options. Obviously, call options are not protecting your downside risk, but are instead giving you the ability to profit if prices go higher.

    Buying a call spread allows you to have the potential to profit if prices go higher, while also cheapening the entry price up and giving a window of upside potential.

    Premiums are quoted on a per-share basis because most option contracts represent shares of the underlying stock.

    Now where do the marginable positions come into play? Well that happens a couple different ways. First and foremost, it happens when you buy an option, and then sell the opposite option premium strategy of option.

    Maybe options are an entirely new concept to you. No matter who you are, you can benefit from the most successful income options trading strategies.

    This would occur by buying a call and selling a put OR buying a put and selling a call. This generally works best when prices are near the lows because it theoretically limits the downside risk associated with the short put. On the flip side, selling a call to pay for a put allows you to cheapen up your downside protection in exchange for setting a ceiling on your physical production.

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    This strategy generally works best when prices are near the highs because it provides you with a better strike price on the put, and theoretically limits your risk associated with the short call option. My goal with this article was to clear up how selling options on futures works.

    Are you a sell-side producer looking for more information on fixed risk hedging techniques?

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    This guide covers basic and complex hedging strategies that can help you avoid exposure to unlimited risk on your hedges.