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Welcome to your source for answers to questions about option concepts, strategies, and terminology. A new question and answer is published each week. To view the Ask the Institute archives, click the "Ask the Institute Archive" link below.

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This week's question:

DATE: January 16, 2015

QUESTION:
Can you explain the potential opportunities and risks associated with selling put options?

ANSWER:
Selling a put option is a strategy that allows you to be paid a premium in return for assuming the obligation to buy a particular stock. The premium received gives you some limited benefit by lowering your break-even. This strategy may also allow you the opportunity to purchase a stock for less than its current price. If you are interested in investing in a stock, you might want to consider selling a put as a means of buying that stock. To learn more about selling put options, view this segment of "Ask the Institute."

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