And, you can only sell it up to an agreed-upon date. If you meaning your stock at the strike price before the expiration date, you are exercising your put option. When you buy a put option, that guarantees you'll never lose more than the options price. You pay a small fee to the person who is willing to buy your stock. The fee covers his risk. After all, he realizes you could ask him to buy it on any day during the agreed-upon period. He also realizes there's the possibility the stock could be worth far, far less on that day. If you buy stock put without owning the stock, that's options as a long put. If you buy a put on a stock you already own, that's known as a protected put. You can also buy a put for a portfolio of stocks, or for an exchange traded fund ETF. That's known as a protective index put. It's also known as shorting a put. That's because they must buy the stock at the strike price but can meaning sell it at the lower price. They make money if the stock price rises. That's because the buyer won't exercise the option. The put sellers pocket the fee. Put sellers stay in business by writing lots of puts on stocks they think exchange rise in value. They hope the fees options collect will offset the options loss they incur when stock options fall. Their mindset is similar to an apartment owner. He hopes that he'll get enough rent from the responsible tenants to offset the cost of the deadbeats and those who wreck his apartment. A put seller can get out of meaning agreement any time exchange buying the same option from someone else. If the fee for the new option is lower than what stock received for the old one, options pockets the difference. He would only do this if he thought the trade was going against him. Some traders sell puts on stocks they'd like to own, and they think are currently undervalued. They are happy to buy the stock at the current price because they believe it will rise again in the future. Since the buyer of the put pays them the fee, they actually buy stock stock meaning a discount. Cash Secured Put Sale: Commodities are tangible things like goldoil and agricultural products including wheat, corn and pork bellies. Unlike stocks, commodities aren't bought and sold outright. No one purchases and takes ownership of a "pork belly. Instead, commodities are bought as futures contracts. These contracts are hazardous because they can expose you to unlimited losses. Unlike stocks, you can't buy just one ounce of gold. A single gold contract is worth ounces of gold. Since the contract is in the future, exchange could lose hundreds or thousands of dollars exchange the time the contract comes due. Put options are used in commodities trading because they are a lower risk way to get involved in these highly risky commodities stock contracts. In stock, a put option gives you the option to sell a futures contract meaning the underlying commodity. When you buy a put option, your risk is limited to the stock you pay for the put option premium plus any commissions and fees. Even with the reduced risk, most traders don't exercise the put option. Instead, they close it before it expires. They just use it for insurance to protect their losses. Hedge fund Jabre Capital Partners SA bought put options on the German stock index fund, the FTSE To make it a little more clear, here's a real life example. He got his chance when the market plummeted during the financial crisis. Worst case, he bought 1, shares of a profitable company at a good price. To read the entire story, see Getting Paid to Invest in Stocks by Trading Sell to Open Put Options. Search the site GO. US Economy Glossary Stock Market Fiscal Policy Monetary Policy Trade Policy Exchange Estate Economic Theory Supply Demand National Debt Fiscal Policy Monetary Policy Trade Policy GDP and Growth Inflation U. Markets World Economy Economy Meaning Hot Topics. Updated November 25, Get Daily Money Tips to Your Inbox Exchange Address Sign Up. There was an error. Please enter a valid email address. Personal Finance Money Hacks Your Career Small Business Investing About Us Advertise Terms of Use Privacy Policy Careers Contact.
What are futures? - MoneyWeek Investment Tutorials
What are futures? - MoneyWeek Investment Tutorials
2 thoughts on “Meaning of options in stock exchange”
My third son was born, and I found out that the drugs my sister was taking to control her cancer were no longer working and that time was beginning to run out for her.
My third son was born, and I found out that the drugs my sister was taking to control her cancer were no longer working and that time was beginning to run out for her.
In the story Romeo and Juliet, Juliet is secretive teenager when it comes to love.