A put option is a contract that gives the option holder the right, but not obligation, to sell a set amount of shares shares per contract at a set price. If the option is exercised , the option writer must purchase the shares from the option holder. If you're new to option trading, Investopedia's Options for Beginners Course will show you the mechanics of options and how they can be used for both hedging and speculation, with over five hours of on-demand video, exercises, and interactive content.
The opposite of a put option is a call option , which gives the holder the right to purchase a set amount of shares at a set price. Whether a put or a call option, however, the option holder can exercise or act on the contract at any time American option until its expiration date.
If the holder wants to exercise the contract, he or she simply lets the broker know of the intent to exercise. Now let's assume that Max does not have shares of Ford Motor Co.
The other alternative to exercising an option is to simply sell the option back to the market. If Max chooses this route, the price he would receive in the market would be equivalent to the gain of exercising.
Dictionary Term Of The Day. Broker Reviews Find the best broker for your trading or investing needs See Reviews. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. A celebration of the most influential advisors and their contributions to critical conversations on finance. Become a day trader. How is a put option exercised? By Chad Langager Share. Holding an option through the expiration date without selling does not automatically guarantee you profits, but it might Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered An option is a financial instrument that gives the holder the right to purchase shares in a company at a certain set price Options are valued in a variety of different ways.
Learn about how options are priced with this tutorial. A brief overview of how to provide from using call options in your portfolio. Trading options is not easy and should only be done under the guidance of a professional.
We look at strategies to help manage taxes and the exercise of incentive and non-qualified stock options. Learn how this simple options contract can work for you, even when your stock isn't.
An option that can be exercised anytime during its life. A security that features a maximum limit on the holder's profit The price at which the underlying security can be purchased call How much a fixed asset is worth at the end of its lease, or at the end of its useful life.
If you lease a car for three years, A target hash is a number that a hashed block header must be less than or equal to in order for a new block to be awarded. Payout ratio is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as Get Free Newsletters Newsletters.More...