How do put options work?
Asked 4 years ago
I am trying to understand “put options”. I get some of the basics, but in the end, I get lost. So if I buy a “put options contract” at a strike price of $230, and the current price of the stock is $240. Let’s say the stock value then drops to $210, and I want to sell my “put”. I understand that this is where it becomes attractive for the buyer to want to purchase my “put” because if he/she purchased my “put” it gives them the “right”, but not the obligation to sell those shares for $230, opposed to the current market value of $210. This is the part where I get lost: who do they sell this stock to? I’ve searched you tube but no one answered that question
Andia Rispah Igobwa
Monday, April 19, 2021
You make money with put options when the price of the option rises or when you exercise the option to buy the stock at a price below the strike price, sell it in the open market, then pocket the difference.
By buying an option, you limit your risk of loss to the premium you paid for the put.
You buy a put option if you expect the underlying price to fall within a specific time frame.
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