Put To Seller

AAA

DEFINITION of 'Put To Seller'

The exercise of a put option. Put to seller would usually occur when the strike price of the put is lower than the market value of the underlying security. At this point, the seller would have the option, but not the obligation to sell the asset to the option writer for a higher price than what is currently dictated by the market.

INVESTOPEDIA EXPLAINS 'Put To Seller'

For example, consider a situation where an investor buys puts to hedge downside risk in his or her position in stock A. The investor buys three-month puts on A with a strike price of $25 and pays a premium of $1.50 (for example). The put seller or writer who earns the premium of $1.50 assumes the risk of buying A from the investor if it falls below $25. Towards the end of the three-month period, if stock A is trading at $22, the investor will sell stock A to the put writer, and receive $25 for each share of stock A.

RELATED TERMS
  1. Premium

    1. The total cost of an option. 2. The difference between the ...
  2. Put Option

    An option contract giving the owner the right, but not the obligation, ...
  3. Strike Price

    The price at which a specific derivative contract can be exercised. ...
  4. Assignment

    1. The transfer of an individual's rights or property to another ...
  5. Underlying

    1. In derivatives, the security that must be delivered when a ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. Introduction To Put Writing
    Options & Futures

    Introduction To Put Writing

  2. The Importance Of Time Value In Options ...
    Options & Futures

    The Importance Of Time Value In Options ...

  3. Use Married Puts To Protect Your Portfolio
    Options & Futures

    Use Married Puts To Protect Your Portfolio

  4. Prices Plunging? Buy A Put!
    Options & Futures

    Prices Plunging? Buy A Put!

comments powered by Disqus
Hot Definitions
  1. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  2. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  3. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  4. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  5. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
  6. Direct Participation Program - DPP

    A business venture designed to let investors participate directly in the cash flow and tax benefits of the underlying investment. ...
Trading Center