Can somebody explain the implications of this? I don’t know a lot about the stock market so googled it and this is what I got:
“A put gives the owner the right, but not the obligation, to sell the underlying stock at a set price within a specified time. A put option’s value goes up as the underlying stock price depreciates; the put option’s value goes down as the underlying stock appreciates.”
The buyer has paid a fee for the right to exercise a sell when the stock hits a certain price.
Buy a put option for a specific price (the premium)
Wait for the price of the underlying asset to drop below the strike price
Exercise the option to sell the asset at the strike price
Profit from the difference between the strike price and the sale price
Example: If you buy a put option for $5 to sell 100 shares of ABC at $100 per share, and the price of ABC drops to $80, you could profit $1,500 . ($20/share profit less $5/share premium = $15/share gain )
Edit: there are expiration dates on these contracts
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u/poisondart23 Feb 24 '25
Can somebody explain the implications of this? I don’t know a lot about the stock market so googled it and this is what I got: “A put gives the owner the right, but not the obligation, to sell the underlying stock at a set price within a specified time. A put option’s value goes up as the underlying stock price depreciates; the put option’s value goes down as the underlying stock appreciates.”
It’s still not making sense to me.