What is Put
When an owner of the assets is given the right but not the obligation to sell certain assets, this option is known as Put. Put extends an option to sell the underlying goods at a specific price within a period. This option is more a right than an obligation.
What is put?
An option that allows the owner of the underlying stock to sell it at a set price within the stated time period is known as a put. The put option's price increases with the depreciation in the stock's price. On the contrary, the appreciation in the stock's price decreases the put option's value.
What are the characteristics of Put?
The characteristics of Put can be listed as follows:
- A put option is given to the owner of the stock
- This option is a right, not an obligation
- This option allows the selling of the underlying stock
- The put option is for a time, where the owner can sell the stock within the specified time at a set price.
- The value of the stock is inversely proportionate to the price of the put option.
- To open the put option, the underlying stock must reach the exercise price.
- The put option comes with an expiration period.
What is the exercise price in the put option?
In the put option, a price that the assets must reach to be a part of the put option is called the exercise price. A buyer usually buys the put option with the view that there will be a drop in the stock's price even below the exercise price.
What are the basics of Put?
- Puts are used on the assets such as currencies, indexes, stocks, and other commodities. The value of put increases with the decrease in the stock's price whereas decreases with the increase in the stock's price.
- The buyer either exercises or sells the underlying stock at a set strike price.
- Traded on multiple assets, including bonds and other assets, the put option is also used to manage risk in the business. This strategy of managing risk is called protective put.
- The value of the put option goes down as it reaches its expiration date. Therefore, the stock is left only with the intrinsic value once it loses its time value.
- When the put option makes the put writer responsible for receiving the underlying assets which are at the strike price, this situation is termed as "put to seller".
What is protective put?
Put also serves as the risk management; therefore, protective put is the strategy that helps as the insurance of investment by ensuring that the losses on the assets do not exceed the strike price.
What is intrinsic value?
The difference derived by deducting the underlying stock from the strike price is known as the intrinsic value.
What is a call option?
The option that provides the owner with the right to purchase the stock at a set price in the coming future. A buyer often expects a call expecting an increase in the asset's value.
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