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Options Ins and Outs. An option is a contract giving an investor the right, but not the obligation, to buy or sell a stock or other asset at a set strike price by a certain expiration date ...
How does a put option work and why would someone buy (or sell) one? Skip to main content. 24/7 Help. For premium support please call: 800-290-4726 more ways to reach us ...
The appeal of buying call options is that they drastically magnify a trader’s profits, as compared to owning the stock directly. With the same initial investment of $200, a trader could buy 10 ...
The seller's potential loss on a naked put can be substantial. If the stock falls all the way to zero (bankruptcy), his loss is equal to the strike price (at which he must buy the stock to cover the option) minus the premium received. The potential upside is the premium received when selling the option: if the stock price is above the strike ...
The price stability itself may also tempt firms into the market, further boosting supply. The upside is security of supply (such as food security); the downside is huge stockpiles, or in other cases, destruction of commodities. The scheme also makes domestic food more expensive for other countries to purchase and operation of such a scheme can ...
Selling a naked option could also be used as an alternative to using a limit order or stop order to open an equity position. Instead of buying an underlying stock outright, one with sufficient cash could sell a put option, receive the premium, and then buy the stock if its price drops to or below the strike price at assignment or expiration ...
Put option: A put option gives its buyer the right, but not the obligation, to sell a stock at the strike price prior to the expiration date. When you buy a call or put option, you pay a premium ...
A trader who expects a stock's price to increase can buy a call option to purchase the stock at a fixed price (strike price) at a later date, rather than purchase the stock outright. The cash outlay on the option is the premium. The trader would have no obligation to buy the stock, but only has the right to do so on or before the expiration date.