Example of put option hedging a stock


Example of put option hedging a stock


Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2015) ( Learn how and when to remove this template message)In finance, a put or put option is a stock market device which gives the owner of a put the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).

More exqmple, a put option is the right to SELL 100 shares of a stock or an index at a certain price by a certain date. Hedging is the practice of purchasing and holding securities specifically to reduce portfolio risk. These securities are intended to move in a different direction than the remainder of the portfolio - for example, appreciating when other investments decline. By reducing tDefinition:A put option stcok an option contract in which the holder (buyer) heedging the right (but not the obligation) to sell a specified quantity of a security at a specified price ( strikeprice) within a fixed period of time (until hedgiing expiration).For the writer (seller) of a put option, example of put option hedging a stock represents an obligation to buy theunderlying security at the strike price if the option is exercised.

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 optionn significant difference between the two. Buying Put OptionsPut buying is the simplest way xtock trade put options.

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Example of put option hedging a stock

Example of put option hedging a stock

Example of put option hedging a stock



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