Buy Stocks with Options
Lets say you want to buy 100 shares of Matze Unlimited and you really want to buy them, because they are part of your long term Dividend Plan for your retirement. Instead of buying them with a regular Market Order you may:Sell one Put-Option (one Put-Options equals 100 shares)
Lets say the price for 1 share is currently 10€ and you are willing to pay up to 10.50€ per share. You then sell the Put Option for 10.50€. This is equal to the following contract between you (the seller) and someone else (the buyer):
"This Option guarantees that whose owner can (but doesnt must) sell 100 shares of this stock for 10.50€ to me."
- Who guarantees? You, because you are the seller.
- The fixed price (10.50€) is called "strike".
- The option is valid until a defined "expiring day".
- The buyer has to pay a rate of X% to the seller for the guarantee.
- The seller gets the rate the moment the option is baught from the buyer (similar to an insurance fee).
- The seller (you) should make a "cash secured put". The broker would then reserve 100*10.50€ for the scenario you have to buy the stocks.
Scenarios
- If the price went sideways, the option will expire hence the buyer will not "exercise" the option.
- If the price went over 10.50€, the option will not be "exercised" by the buyer.
- If the price is under 10.50€, you have to buy the shares for 10.50€ each (but still got the rate).
Dividend Stocks to consider: Matze Dividend Finviz Preset