This process, identified as leverage, gives you a chance to tackle additional risk and gain additional publicity for opportunity gains with less cash upfront. But leverage shouldn't be taken flippantly, as that additional hazard usually means you've got a larger chance to get click here rid of The cash you've invested. You furthermore mght must meet up with sure needs to margin trade.
In the event the stock drops below the strike selling price, your selection is in the money and you'll benefit from it. Otherwise, you would forfeit the premium and stroll away.