If the option is “out of the money” — if the market price of the underlying stock stays higher than the strike price until expiration — then the put is worthless for the buyer, and they will likely let it expire without exercising it. In that case, you as the seller get to keep...
Put options are usually bought and sold in blocks corresponding to the right to sell 100 shares of the underlying asset, though the premium is expressed on a per-share basis. How are put options valued? Until the put option expires, it has a value. For example, if the strike price is...
But with a short put (or – with a put sold to open), I don’t need price to do anything more than get above (or stay above) the put I sold to open. These two trades require two different things from the market. Some traders would agree that picking the direction of a stock is...
Intrinsic Value of Put Option = Strike Price - Security Market Price If a option contract has a positive intrinsic value, it is said to be "in the money" or ITM. An option contract with negative intrinsic value is said to be "out of the money", or OTM. If the security's market pr...
Finally, to buy a call you need to understand what the option prices mean and find one that is reasonably priced. If YHOO is trading at $27 a share and you are looking to buy a call of the October $30 call option, the call option price is determined just like a stock--totally on...
This contrasts to a put option in the most that a stock price can go down is to $0. So the most that a put option can ever be in the money is the value of the strike price. What happens to the call options if YHOO doesn't go up to $50 and only goes to $45?
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Selling a put: You have an obligation to buy the security at a predetermined price from the option buyer if they exercise the option. Conversely, buying a put option gives the owner the right to sell the underlying security at the option exercise price. Thus, buying a call option is abull...
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A put option (or “put”) is a contract giving the option buyer the right, but not the obligation, to sell—or sell short—a specified amount of an underlying security at a predetermined price within a specified time frame. This predetermined price at which the buyer of the put option ca...