Put Options Wiki
Put options
explained
Buying
a Put Option
Buy
when you think a stock will be going down
When you buy a put option, you are entering into a contract with
someone who wants to buy your stocks at a future time. When that time
comes you can choose to sell the stocks or chose to keep them.
Heres
the point.
If the stock goes down like you guessed it would, your contract with
the person who agreed to buy your stocks, allows you to get rid of
those stocks. The other party has to buy them.
People
who buy put options don't usually even own the stocks they are paying a
fee for the right to sell.
If
the stock price goes up, you just don't have to sell anything, because
you bought the option to sell or not sell.
If it goes down as planned, you buy the shares in the open market for
the new low price and then deliver "put out" those shares to the party
that agreed to buy them for the agreed upon "strike price"
Lets
assume the price of the stock went down and you sond the stcks at the
strike price.
put
option payoff diagram
Selling a Put Option.
Only if you
are sure a stock is going up.
In
this case you a betting a stock is going up. If it doesn't, you have
agreed to buy a certain stock for an agreed amount and will end up
paying too much for a stock.
Hopefully the stock only went down by the amount of the fee you
collected so you can break even.
This
is the least recomended options trading strategies since most are
losers abd you will need to buffet put options contract's risk with an
additional call optiion hedge.
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vs call option call option wiki
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