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An option strategy whereby an investor, holding a long position in stock, purchases a put on the same stock to protect against a depreciation in the stock's price.
Potential gains or losses from a married put strategy are created from the net effect of a long position in both the put and its underlying stock. A three-legged option strategy, often used in forex trading, that can provide a hedge against the undesired movement of an underlying asset.

The option contracts must be in equal amounts and are normally priced to produce a zero premium. A seagull option is structured through the purchase of a call spread and the sale of a put option (or vice versa).
This structure is appropriate when volatility is high but expected to fall, and the price is expected to trade with a lack of certainty on direction.In the second example above, a hedger purchases a seagull option structured as the purchase of a call spread (two calls), financed by the sale of one out-of-the-money put, ideally to create a zero-premium structure.

Should the stock price decline below the strike price before expiration of the option, the investor would exercise the put option and sell his or her stock at the strike price.

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Author: admin | 02.09.2014 | Category: Online Stock Trading Company

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