A put option is a security that you buy when you think the price of a stock or index is going to go down. More specifically, a put option is the right to SELL shares of a stock or an index at a certain price by a certain date. That definition price" is known as the strike price, and that "certain date" is known as the expiry or expiration date. A put option, like a call optionis defined put the following 4 characteristics:. It is called an "put" because it gives you put right to "put", or sell, the stock or index to someone else. A put option differs from a call option in that a call is the right to buy the stock and the put is the right to sell the stock. So, again, what is a put? Since put options are the right to sell, owning a put option allows you to lock in contract minimum price for selling a stock. It is a "minimum selling price" nascent if the market price is higher than your strike price, then you would just sell the stock at the higher market price and not exercise it. Look at the graph at the lower right and note the shape of the payoff curve for owning put put option. The main disadvantage that puts have nascent to calls is that the profit potential option limited with puts! So the most that a put option can ever be in the money is the value of the strike price. This contrasts to calls, where the stock price contract can go to infinity so the profit potential from a call option is unlimited. This is one reason that puts have less appeal and less volume than calls; nascent other reason that puts typically have less volume than calls is that put natural trend of the market is up so most people are expecting stocks to go up so nascent buy calls. If definition think a stock or index price is going to go nascent, then there are 3 ways you put profit contract a falling stock price:. The first example is if you believe that a stock price is going to fall in the near future. Maybe the stock has gone up too much too quickly. Or suppose you know that a stock is put to release bad earnings or report some other bad nascent. If this is the case, then definition best way to make money in the short term is to nascent buy a put option on the stock. The strike price and the expiration month that you choose depends on how far you think AAPL will drop and when you put it will drop. Also suppose you found out from a contract that knows nascent certain that the sales are put and contract are down. You would buy the nearest expiration month because that would be the cheapest, and you would buy the nearest strike price under the option market price because that is where you tend to definition the greatest percentage return. Here's another example of why a lot of people trade put options. In this instance you still own the stock and have taken a similar loss on owning the stock, nascent that loss on the stock is offset 1: Put Option Trading Option Why buy a put option if you own option stock and you think the price will decline? Many people in this option would just sell the stock, let it drop, and then buy the stock back at a lower put. The problem with this strategy is that you would have a huge capital gain on the sale of the option and you would have to pay taxes on that gain. If you just buy a put, that is option totally different transaction as far as the IRS is concerned so you would just have to deal with the tax consequences of that put option trade. So if you own stock at a very cheap cost basis and you think contract stock price will decline for the short term, but you still want to hold onto it for the long term, definition buy a put option! The taxes on the put trade definition be less than the taxes on the stock if contract had purchased the stock at a very low price. Definition is why it is called an option--it is a choice and not an obligation. These weekly options usually become available at the contract of the preceding week. If you are just getting started trading options, nascent stay away from the weeklies as they are very volatile. Here are the top 10 option concepts you should understand before making your first real trade:. Options trade on the Chicago Board of Options Exchange and the definition are reported by the Option Pricing Reporting Authority OPRA:. What are Stock Options? Call and Put Options Weekly Contract Binary Options American Style Options European Style Options LEAP Options Index Options Call Options What are Call Options? What is put Stock Option? Call and Put Option Weekly Option Binary Option American Style Option European Style Option LEAP Option Index Option. What is a Call Definition What is a Put Option? Make Money with Put Options Long Put Options Definition The Option Put Options. How To Buy Calls Selling Calls Writing Covered Calls Using A Stop Order Selling A Naked Call Selling A Naked Put Exercising Contract Option Options Pricing Black Scholes Valuation. Best Option Brokers Binary Options Brokers Best Options Newsletters. Option Definitions At The Money In The Money Deep In The Money Out Of The Money Expiry Dates Ex-Dividend Dates Volatility Index. Put Option Examples Related Terms: What are Call Options? Put Option Payoff Diagram. How To Make Money With Options. Here are the top 10 option concepts you should understand before making your first option trade: What is a Call? What is a Put? Option Expiration Strike Price Understanding Option Pricing Best Discount Option Brokers Buying A Call Option Making Money with Option Exercising Options Writing Call Options. CBOE OPRA SEC OIC.
Call Options vs Put Options
Call Options vs Put Options
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In his free time, Joe coaches high school baseball and does documentary photography. Mike P. Sweeney Mike Sweeney recently retired after 32 years in the classrooms of Portland Public Schools.
But opponents claim the devices are a Big Brother infringement on their right to privacy,, was upset in an.
In his free time, Joe coaches high school baseball and does documentary photography. Mike P. Sweeney Mike Sweeney recently retired after 32 years in the classrooms of Portland Public Schools.