What Is A Put Option?
A put option is the opposite of a call option. If granted, call options give the holder the right to buy a security before its expiration date at a predetermined strike price. A put that is in the money has intrinsic value. In this article, we'll cover how put options work and outline a scenario where you might generate profits.
Important Points to Consider:
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Investors with put options have the right but not the obligation to sell shares at a certain price by a specified date.
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A put option is considered to be 'in the money' if the strike price is higher than the current price of the underlying asset.
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Investors commonly use put options as a protective measure against downside changes to asset value.
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A put option allows investors to take a short position on the underlying asset. The limited risk is that if the price of the underlying asset increases, you may lose some money.
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The time-value of a put option can also have an impact on its price. This additional premium above the intrinsic value can affect the total worth of the put option.
