More specifically, a put option is the right to SELL 100 shares of a stock or an index at a certain price by a certain date. As you become more informed about the options market, you will need to learn how to use a long or short position in either a rising or falling market. Going long on a call is a profitable strategy when the underlying stock price rises in value, but how can you make money on a falling stock. By going long on a put. Puts are essentially the opposite of calls and have different payoff diagrams.
Read on to find out how they work - and how you can profit. (For more information on the long position, see Going Long On Calls.)Put Your Money Where Your Mouth IsGoing long on puts should not be confused with the technique of married puts. The put option writer is paid a premium for taking on the risk associated with the obligation.For stock options, each contract covers 100 shares. Note: This article is all about put options for traditional stock options. If you are looking for information pertaining to put options as used in binary option trading, please read our writeup on binary put options instead as there are significant difference between the two.
Buying Put OptionsPut buying is the simplest way to trade put options. When the optioThe long put option strategy is a basic strategy in options trading where the investor buy put options with the belief that the price of the underlyingsecurity will go significantly below the striking price before theexpiration date. Long Put ConstructionBuy 1 ATM PutPut Buying vs. Short SellingCompared to short selling the stock, it is more buy to open put option example using arraylist to bet against a stock by purchasing put options as the investor does not have to borrow the stock to short.
Additionally, the risk is capped to the premium paid for the put options, as opposed to unlimited risk when short selling the underlying stock outright.However, put options have a limited lifespan. Never miss a trending story with yahoo.comas your homepage. Every new tab displays beautiful Flickr photos and your most recently visited sites.