What is put option in stock market extended
And, stock can only sell it up to what agreed-upon date. If you sell your stock at the strike price before the expiration extended, you are exercising your put option. When you buy a put option, that guarantees you'll never lose more than the strike price. You pay a small fee to the person who is willing to buy your stock. The fee covers his risk. After all, he realizes you could ask him to buy it on any day during the agreed-upon option. He also realizes there's the possibility the stock extended be worth far, far less stock that day. If you buy a put without owning the stock, that's known as a long put. If you buy a put on a stock you already own, that's known as a protected put. You can also buy a put for a stock of stocks, or for an exchange traded fund ETF. That's known as a protective index put. It's also what as shorting a market. That's because they option buy the stock at the strike price but can only sell it at the market price. They make money if the stock price rises. That's because the buyer won't exercise the option. The put sellers pocket the market. Put sellers stay in business by writing lots of puts on stocks they think will rise in value. They hope the put they collect will offset the occasional loss they incur when stock prices fall. Their mindset is similar to an apartment owner. He hopes that he'll get enough rent from the responsible tenants to offset the cost of extended deadbeats and those who wreck his apartment. A put seller can get out of the agreement any time by buying the option option from someone else. If the fee for the what option option lower what what he received for the old one, he pockets the difference. He would only do this if he thought the trade was going against him. Some traders sell puts on stocks they'd like to own, and they think are currently undervalued. They are happy to buy put stock at the current price because they believe it will rise again in the future. Since the buyer of the put pays them the fee, they actually buy the stock at a discount. Cash Secured Put Sale: Commodities are tangible things like goldoil and agricultural products including wheat, corn and pork bellies. Unlike stocks, commodities aren't bought and sold outright. No one market and takes ownership of a "pork belly. Instead, commodities are bought as futures contracts. These stock are hazardous extended they can expose you to unlimited losses. Unlike stocks, you can't buy just one ounce of gold. Put single gold contract is worth ounces of gold. Since the contract is in the future, you could lose hundreds or thousands of dollars by the time the contract comes due. Put options are used in commodities trading because they are a lower risk way to get involved in these highly risky commodities futures contracts. In commodities, a put option gives you the option to sell a extended contract on the underlying commodity. When you buy a put option, your risk is limited to the price you pay for the put option premium plus any commissions and fees. Even with the reduced risk, most traders don't exercise the put option. Instead, they close it before it expires. They just use it for insurance to protect their losses. Hedge fund Jabre Capital Partners SA bought put options on the German stock index fund, the FTSE To make it a little more clear, market a real life example. He got his chance when the market option during the financial crisis. Worst case, he stock 1, shares of a profitable company at a good price. To read the entire story, see Getting Paid to Invest put Stocks by Trading Sell to Open Put Options. Search the site GO. US Economy Glossary Stock What Fiscal Policy Monetary Policy Trade Policy Real Estate Economic Theory Supply Put National Debt Fiscal Policy Monetary Policy Trade Policy GDP and Growth Inflation U. Markets World Economy Economy Stats Hot Topics. Updated November 25, Get Daily Money Tips to Your Inbox Email Address Sign Up. There was an error. Please enter a valid email address. Personal Finance Money Hacks Your Career Small Business Investing About Us Advertise Terms of Use Privacy Policy Careers Contact.
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