Put Option

Filed Under »
Dictionary Says

Definition of 'Put Option'

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.

Investopedia Says

Investopedia explains 'Put Option'

A put becomes more valuable as the price of the underlying stock depreciates relative to the strike price. For example, if you have one Mar 08 Taser 10 put, you have the right to sell 100 shares of Taser at $10 until March 2008 (usually the third Friday of the month). If shares of Taser fall to $5 and you exercise the option, you can purchase 100 shares of Taser for $5 in the market and sell the shares to the option's writer for $10 each, which means you make $500 (100 x ($10-$5)) on the put option. Note that the maximum amount of potential proft in this example ignores the premium paid to obtain the put option.

Related Video for 'Put Option'

Articles Of Interest

  1.

    Profiting In Bear And Bull Markets

    There are many ways to profit in both bear and bull markets. The key to success is using the tools for each market to their full advantage.

  2. The Barnyard Basics Of Derivatives

    This tale of a fictional chicken farm is a great way to learn how derivatives work in the market.

  3. Practical And Affordable Hedging Strategies

    Learn how to find and use the most cost-effective ways to transfer risk.

  4. Make Your Portfolio Safer With Risky Investments

    A high-risk security can reduce risk overall. Find out how it works.

  5. Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.

  6. Put Option Basics

    Put option allow investors to hedge an investment they own or speculate in an investment they don't own. Find out more about this type of option and how it can work in an investor's favor.

  7. 4 Reasons To Hold Onto An Option

    There are times when an investor shouldn't exercise an option. Find out when to hold and when to fold.

  8. Minimize Risk With The Long Collar

    Think your favorite stock is on the way down? This simple option-trading strategy can help you manage your risks without selling the stock.

  9. Profiting From Stock Declines: Bear Put Spread Vs. Long Put

    If you're bearish, you should compare the risk/reward characteristics of these two strategies.

  10. How To Avoid Closing Options Below Intrinsic Value

    Find out how to get a better price for your option and increase your trading profits.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...

  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center