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BCI PODCAST 40 Covered Puts are Not Cash Secured Puts

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Retail investors may confuse 2 very different strategies that sound the same. Covered puts is a risky strategy that involves shorting a stock and selling a put option. The trader is obligated to replace the “borrowed” stock and buy the shares at the strike price.

Selling cash-secured puts is a low-risk strategy appropriate for most retail investors that involves selling a put option and placing the appropriate amount of cash in the account to “secure” the put. Hypothetical examples are used to clarify the differences between the 2 strategies.

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

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