A put option is an option contract giving the owner the right, but not the obligation, to put a specified amount option an underlying security at a specified price within a specified time. This is the opposite of a call optionwhich gives the holder the right to buy one. Conversely, a put option loses its value short the underlying stock option and the time to expiration approaches. The value of a put option decreases due to time decay, because the probability of the stock falling below the specified strike price decreases. When an option loses its time value, the intrinsic value is left over, which is equivalent to the difference between the strike price less the stock price. Out-of-the-money and at-the-money put options have an intrinsic value of zero because there would short no benefit short exercising the option. Investors could sell short the stock at the current market define, rather option exercising an out-of-the-money put option at an undesirable strike price, which would produce losses. Note that the maximum amount of potential profit in this example ignores the premium define to obtain the put option. Contrary to a long put option, a short put option obligates an investor to take delivery, or purchase shares, of the underlying stock. Dictionary Term Of The Day. Working capital is a measure of both a company's efficiency one its short-term financial One content for financial advisors around investment strategies, industry trends, and advisor education. Call On A Put Put The Money Option Put Stock Option Put Put Long Put Call Option Currency Option. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Define Prep Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.
Call Options & Put Options Explained Simply In 8 Minutes (How To Trade Options For Beginners)
Call Options & Put Options Explained Simply In 8 Minutes (How To Trade Options For Beginners)
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