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