Suppose you’d be happy to buy UBS shares, but only if they fall to €25.

You can sell a put option with a €25 strike price, expiring on 20 June 2025.

• You receive a payment: for example, CHF 43 (around €44) up front for selling this option.
• You set aside €2,500 in your account (enough to buy 100 shares at €25 each).
• If the price never drops to €25, you keep the €44 as extra income.

How could this play out?

*Approximate yield, before fees or taxes.

• If UBS stays above €25:
  You simply pocket the €44. This is like earning a bit of interest on cash that was “waiting to invest.”
• If UBS dips below €25:
  You buy at €25, but because you received €0.44 per share in premium, your effective cost is €24.56 per share. This is cheaper than today’s price.
• If UBS falls much further:
  You still buy at €25. Like any stock purchase, you have a loss if the price drops, but you got paid €44 to take the risk.

What are the risks?

• You might have to buy shares even if the price keeps dropping:
  The worst-case is the same as buying the stock outright at your agreed price, minus the premium.
• Your cash is locked up:
  Your €2,500 is reserved until the option expires. You can’t use it for other investments in the meantime.

Why might this appeal to a cautious, long-term investor?

• You choose the price you’re willing to pay.
• You get paid (the premium) for waiting.
• The risk is clear: you might end up owning UBS at your chosen price, and only if the price drops.

Key definitions

• Put option: A contract where you agree to buy shares at a set price if assigned. (You are the seller, so you must buy if the option is exercised.)
• Strike price: The price you agree to buy the shares at.
• Premium: The cash payment you receive for selling the option.
• Assigned: If UBS drops below the strike price, you must buy the shares.
• Expiry: The date this agreement ends.

Frequently asked questions (FAQ)

Q: Will I lose money if UBS falls hard?
A: Yes. Just like owning the stock, you will have a loss if the price falls well below your net purchase price (strike minus premium). But you do get paid up front to take the risk.

Q: Can I change my mind before expiry?
A: Yes, you can close (buy back) the put option before expiry, but the price you pay will depend on UBS’s share price at that time.

Q: Is there a minimum amount required?
A: Each put contract covers 100 shares, so make sure you have enough cash for the full amount.