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Why puts and calls are sold

The question might be asked if there is a chance to make large profits on a small risk in
buying Puts and Calls why do traders and wealthy speculators sell them?
Often a trader who is out of the market is willing to buy stocks if they decline 4 or
5 points, therefore he will sell you a Put on a stock 3 or 5 Points away and you pay
him the premium of $137.50; then if the stock declines to the level at which he is
willing to buy and even though it goes lower, you deliver it to him, he is satisfied to
buy it at that level. On the other hand often these big traders have accumulated a
large line of stock and already have profits in them, so they are willing to sell all or
part of their line should the market advance 5 or 10 points more, therefore they are
willing to sell you Calls on the stocks they hold or part of what they hold 5 or 10
points above the market, as the case may be, and are perfectly willing to deliver you
the stock and permit you to have the profit above that price for the premium that you
pay. Another reason they sell them is that they know they can always protect
themselves. If the market is very strong and you are going to make profits on the Call
they sold to you or you are going to call the stock, they can buy more. On the other
hand, suppose they sell you Puts: The market starts declining fast and looks like
going lower, where you will have a profit on the Put you bought, they can sell short,
put up the margin and carry the stock until you deliver it to them against the Put. It is
a perfectly legitimate business just the same as insurance business and is fair to
both buyer and seller.

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