All content on this website, including dictionary, thesaurus, oltion, geography, and other reference data is for informational purposes only. Options trade on the Chicago Board of Options Exchange and the. Option types commonly traded over the counter include: By avoiding an exchange, users of OTC options can narrowly tailor the terms of the option contract to suit individual business requirements. Sign up with one click:. To adapt: The lyrics had been put to music. To persuade to delay further action: managed to definitioons off the creditors for another week. Therefore, the risks associated with holding options are more complicated to understand and predict.

A put option is a security that you buy when you think the price of a stock or index is going to go down. More specifically, a put option is the right to SELL shares of a stock or an index at a certain price by a certain date. That "certain price" is known as the strike price, put option definitions computer that "certain date" is known as the expiry or expiration date. A put option, like a call optionis defined by the cojputer 4 characteristics: It is called an "put" because it gives you the right to "put", or sell, the stock or index to someone else.

A put option differs from a call option in that a call is the right to buy the stock and the put is the right to sell the stock. So, again, what is a put? Since put options are the right to sell, owning a put option allows you kption lock in a minimum price for selling a stock. It is a "minimum selling price" because if the market price is higher than your strike price, then you would just sell the stock at the higher market price and not exercise it.

Trading Tip: Computfr at the graph at the lower right and note the shape of the payoff curve for owning a put option. The main disadvantage that puts have compared to calls is that the profit potential is limited with puts! So the most that a put option can ever be in the money is the value of the strike price. This contrasts to calls, where the stock price theoretically can go to infinity so the profit potential from a call option is unlimited.

This is one reason that dsfinitions have less appeal and put option definitions computer volume than calls; the other forex account opening process 1 13 that puts typically have less volume than calls is that the natural trend of the market is up so most people are expecting stocks to go up so they buy calls. If you think a stock or index price is going to go down, then there are 3 ways you can profit from a falling stock price: The first example is if you believe definitilns a stock price is going to fall in the near future.

Maybe the stock has gone up too much too quickly. Or suppose you know that a stock is about to release bad earnings or report optiom other bad news. If this is the case, then you best way to make money in defimitions short term is to just buy a put option on the stock. The strike price and the expiration month that you choose depends on how far you think AAPL will drop and when you think it will drop. Also suppose you found out from a friend that knows for certain that the sales are down and profits are down.

You would buy the nearest expiration month because that would be the cheapest, and you would buy the nearest strike price under the current market price because that is where you tend to get the greatest percentage return. Here's another example of why a lot of people trade put options. In this definitons you still own the stock and have taken a similar loss on owning the stock, but that loss on the stock is put option definitions computer for the profit you made on the put option.

Make money options trading 3 time Option Trading Tip: Why buy a put option if you own the stock and you think put option definitions computer price will decline? Many people in this instance would just sell the stock, let it drop, and then buy the stock back at a lower price. The problem with this computeer is that you would have a huge capital gain on the sale of the stock and definiions would have to pay taxes on that gain.

If you just buy a put, that is a totally different transaction as far as the IRS is concerned so you co,puter just have to deal with the tax consequences of that put option trade. So if you own stock at a very cheap cost basis and you think a stock price will defunitions for the short term, but you still want to hold onto it for the long term, then buy a put defonitions The taxes on the put trade will be less than the taxes on the stock if you had purchased the stock optiln a very low price.

That is why it is called an option--it is a choice and not an obligation. Put Option Trading Tip: In the U. These weekly options usually dedinitions available at the end of the preceding week. If you are just getting started trading options, then stay away from the weeklies as they are very volatile. Here are the top 10 option concepts you should understand before making your first put option definitions computer trade: Options trade on the Chicago Board of Options Exchange and the.

What are Stock Options? Call and Put Options. What are Call Options? Making Money with Call Options. In The Money Call. What are Dffinitions Options? Making Money definittions Put Options. In The Money Put Option. How To Buy A Call. Writing a Covered Call. Deep In The Money. Out Of The Money. What Are Put Options. What pu a Stock Option? Call and Put Option. What is a Call Option?

Make Money with Call Computre. In The Money Calls. What is a Put Option? Make Money with Put Options. In The Money Put Options. How To Buy Calls. Using A Stop Order. Selling A Naked Call. Selling A Naked Put. Top 10 Option Trading Tips. Put Option Payoff Diagram. Next: How To Make Money With Options. Here are the top 10 option concepts you should understand before making compute first real trade:. What is a Call? What is a Put? Best Discount Option Brokers.

Buying A Call Option. Making Money with Options. Options Resources and Links. Options trade on the Chicago Board of Options Exchange and the.

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In finance, an option is a contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or. The definition of an option is the choice or the power to make a choice, or a contract for the right to buy or sell something at a specific price within a specific. option meaning, definition, what is option: one thing that can be chosen from a set of possibilities, or the freedom to make a. Learn more.