Questions tagged [put-options]

This tag is to be used for any question on put-options. i.e. an agreement or right to sell a stock or commodity at a specific price. Related tags [call-options, options, options-assignment, option-exercise] should be used when appropriate.

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40
votes
10answers
43k views

Options for dummies. Can you explain how puts & calls work, simply?

I never understood Puts or Calls. Could anybody explain it like I were a child?
16
votes
2answers
2k views

How can put options be used to buy shares at a lower price?

How to use puts, if you are a net buyer of stocks? I read an article about Warren Buffet buying Burlington Northern stocks and how he used puts to lower the buying price of the shares. Please, ...
15
votes
4answers
7k views

Who buys these significantly out-of-money options? [duplicate]

The following is the screenshot of the NIFTY 50 option chain. It is taken from the following link. Why are these people buying these significantly out-of-the-money options? In this case, it's the ...
15
votes
3answers
4k views

Why do speculators short-sell a stock when they wish to go short, rather than purchase put options?

I'm still trying to figure out, why, if a speculator believes a security will go down in value they use the traditional route of short-selling, when it would seem that purchasing put options is the ...
13
votes
1answer
2k views

Do companies sell puts when buying back shares?

Say company X has a share price of $80. They think their shares are undervalued, and their board approved a buyback of $1 billion. Can company X use the $1 billion to sell puts at $79, with the idea ...
9
votes
3answers
8k views

How does one typically exit (close out) a large, in-the-money long put option position?

I'm long some puts on a stock that has dropped a great deal. I've made $400,000 on an investment of $100,000. The question is, how do I exit? I can't really sell the puts because there isn't enough ...
7
votes
3answers
3k views

Am I understanding buying options on stock correctly

I'm just wondering if I am understanding Stock options correctly. Basically if I am watching stock XYZ. It's currently at $10 per share which I believe is low and should raise to 20 within 1 month. ...
7
votes
4answers
5k views

Why won't my retirement account let me write a “covered put”?

My retirement account (a traditional IRA) will let me write a covered call, where I sell a call option if I have the underlying securities (for instance, 100 shares of IBM). The shares are required to ...
7
votes
2answers
534 views

What does this statement regarding put options mean?

I read an article in the NY Times, but I don't understand what this statement means: “The 16 puts on Cisco are offered at 71 cents. We should buy 1,000,” he says to a trader sitting across the desk, ...
6
votes
3answers
917 views

Options for the intelligent but inexperienced

(Related to "Options for Dummies" and "What are some good options strategies...") I've been an investor in stocks for the past 14 years and have the confidence that I know what I'm doing. (Not that I ...
6
votes
3answers
12k views

How do you calculate the rate of return (ROR) when buying and selling put options?

How do you calculate the rate of return (ROR) when buying and selling put options?
6
votes
1answer
2k views

Options: Letting it expire or sell when profiting?

Do you let your options expire or would you sell it before you let it expire if you're profiting (meaning you're in the green - market is going towards the correct direction you anticipated). If you ...
6
votes
1answer
124 views

why some brokerage does not allow uncovered (cash secured) put via online order?

In past, I had brokerage accounts with Vanguard and I have option level approved for writing uncovered put( Level 4). I could place covered call orders via the website. But to place uncovered put ( ...
6
votes
1answer
16k views

How urgent is it to close put options when a company enters bankruptcy? How likely is it to have trading halted?

I own Jan-2020 put options on a company in bankruptcy, but the stock is trading between .25 and .50 and my limit orders to sell those puts are not getting filled yet. The trading on the shares has ...
5
votes
4answers
12k views

Buying puts without owning underlying

I'm looking to buy puts for short-term option trading. My time horizon is a week to two weeks at most. I only ever trade the options - I never hold to expiration. When I attempt to buy a put, I get an ...
5
votes
2answers
1k views

Can a put option and call option be exercised for the same stock with different strike prices?

Refer to http://finance.yahoo.com/q/os?s=PEI&m=2011-10-21 If I were to sell a call @ 15 and sell a put @ 13, come October 21, is it possible for BOTH of the options sold to be exercised?
5
votes
2answers
299 views

Funneling money from a Traditional IRA to a Roth IRA using Options: Is my method possible and tax legal?

I'm new IRAs and I have both a traditional and Roth. My plan is to buy stocks in the IRA and buy protective puts in the Roth that guaranty a maximum risk of 5% or less across both accounts. I expect ...
5
votes
1answer
5k views

How to record a written put option in double-entry accounting?

I have been using double-entry accounting to carefully track my financial situation for a couple of years now, but I am just dabbling with stock options for the first time. I wrote a put option (sold ...
4
votes
7answers
2k views

Is selling put options an advisable strategy for a retiree to generate stable income?

Suppose a retiree wants to generate stable income from selling S&P500 (or other stock index) put options. Is this an advisable strategy for a retiree?
4
votes
4answers
2k views

Options strategy - When stocks go opposite of your purchase?

I'm a bit new to options and would like to ask for someone's strategy opinion. Lets say that you buy a call at an expiration date 2 months or so from now, and in a few days you see the stock go flat ...
4
votes
3answers
261 views

Can I profit from selling a PUT on BBY?

http://www.google.com/finance/option_chain?q=NYSE:BBY If I sell a Put at a $28 strike price, I'll earn $0.26/share (times 100 for one contract) = $26 today, correct? And as long as BBY doesn't drop ...
4
votes
2answers
870 views

Can you buy an option and immediately exercise it? Options delays questions

Assuming American Options Can you buy a stock option and immediately exercise it - or are you only formally given control of the option at the end of the trading day? Would you be able to sell it ...
4
votes
5answers
14k views

How do you go about exercising a put option with less than 100 shares?

I've 50 shares of a company and I'm wanting to leverage that with a put option (Buy to Open, with the expectation share price might drop). When the prices is right and I want to exercise the option(...
4
votes
3answers
167 views

Are buying puts valid portfolio protection?

Any article you read on buying puts for downside protection always walks through the optimal outcome. It goes like this: You buy cheap puts, the market declines before your puts expire and you have a ...
4
votes
2answers
301 views

Can you write a put option without sufficient funds to meet the potential obligation?

When writing a put option does your account have to be funded so that if the buyer exercises the right to sell you can meet your obligation, or can you write the put option without the funds to meet ...
4
votes
2answers
132 views

Option trading: High dollar value stock option and equity exposure

Probably an elementary question on options: If I trade options of a high dollar value stock, I will be exposed to higher equity as 1 option = 100 shares. Is there a way to reduce equity exposure? ...
3
votes
3answers
4k views

Do stock option prices predicate the underlying stock's movement?

I am trying to understand if my thinking is correct or not. I am looking at a stock that is @ $10.00. When I look at the options on the stock $11, $12... calls are all down today and $11, $12... ...
3
votes
4answers
299 views

Trying to get my head around how options work

A stock X is trading at $215. I bought a put at a strike price $195 for $2.55 premium(paid $255) expiring June 7. Today the stock is down by $15 to $200. However, the price of my put is reduced from $...
3
votes
1answer
168 views

What is a bull put spread?

When someone in the stock market says they are going to do a bull put spread, what does that mean, and what services do they use to do it?
3
votes
3answers
247 views

When a near term outlook on an asset is negative, is it possible to make money using both put and call options?

This question is about Put options. These contracts give the buyer the right to sell some underlying asset at some agreed strike price at or before (American style contract) the expiration date. Call ...
3
votes
3answers
419 views

Exercise a put option when shorting is not possible

Sometimes when I want to short a stock, my broker says that no shares are available for borrowing. In this situation, can I buy a put and exercise it immediately and end up with a short position? in ...
3
votes
3answers
845 views

How to Hedge delta and gamma of a put option simultaneously?

Say you took a short put position of 100 options (as you feel the option is undervalued). This put has a Delta of -0.5, so to make the portfolio delta-neutral you short 50 shares of the underlying ...
3
votes
1answer
405 views

Put Option Payoff Replication (Dynamic Hedging)

We know that we can use the below equation in the link to replicate the payoff of a call option using stocks and bonds. I am wondering what the equation would look like for a put option instead. In ...
3
votes
2answers
4k views

What is the face value of sovereign and Britannia gold coins?

I have seen claims on the internet saying sovereigns have face value of £1 and £100. These coins therefore have an embedded put option at the strike being the face value.
3
votes
1answer
318 views

Is it possible to see option prices from the past?

For example, I can look up what a companies stock price was like in the past, but I can't look up an option chain from the past.
3
votes
1answer
153 views

Taxes, Puts and the Wash Rule

If an investor sells a stock at a loss and on the next day, he sells a put on the same stock, does the selling of the put trigger the wash rule? Does it matter if the put was sold out of the money? I ...
3
votes
2answers
9k views

Difference between Black-Scholes, Binomial models and Market price in European index options?

Need some help! I have calculated the theoretical price of an index option using BS and Binomial models and are now comparing the three. While BS and Binomial have approximately the same value, ...
2
votes
4answers
520 views

Do most rookies make a fortune in a bear market by short selling and put options?

A friend warned me not to be over confident in my rookie years buying stocks. He said during a bull market, it is very easy for everyone to look like a winner. Can the reverse be said for rookies ...
2
votes
1answer
106 views

Put Option Pricing

I'm looking to buy a put option, but I don't understand the pricing. There is a stock X, and it trades at $200 / share. A 1 week put option is priced at $0.75 / option. But to actually make the trade ...
2
votes
3answers
264 views

Starting with options trading

I am a regular trader with stocks but I am a complete beginner with options. I am referring to a few online resources like here and here However, I have a few questions. Say I call a stock at $50 ...
2
votes
2answers
529 views

Stock options: payoff diagrams assume European style exercising

Most literature on stock option strategies expresses payoff outcomes in terms of European options -- namely, ones that can only be exercised on the expiration date. See this Iron Condor payoff ...
2
votes
2answers
11k views

Difference between European and American options

Appreciate some help with a problem i am facing OK, so first I found a put and call option with same strike price and maturity for both American-style and European-style options. I selected the ones ...
2
votes
2answers
59 views

If I sell an out of the money put option for 20$, and the stock goes to 5$ below the strike price, how likely is it to Be exercised?

If ACME is at 100 and I sell a 90$ put option for 10$, how likely is it that the option will be exercised if the price is less than the strike price but above (strike - cost)? 85$ For instance? If he ...
2
votes
2answers
988 views

OTM puts or ITM puts in fear of market crash

If I own some shares, but at the same time I am afraid of a market crash, should I buy OTM puts or ITM puts?
2
votes
3answers
4k views

When does it make sense to early exercise a deep in the money put option

I understand the logic for call options. When dividends exceed the time value left, then it is profitable to early exercise a call. But the same does not hold for a put. So, when to early exercise a ...
2
votes
4answers
552 views

Is a naked put really that risky

The word 'naked' in relation to options is synonymous with unlimited risk. But 'naked' puts are limited risk, the risk is limited to the strike price. So , why is it classified in the same category by ...
2
votes
2answers
113 views

Put option lost value when stock price dropped?

I had purchased 3 puts of MNOV yesterday with a strike price of 7.50 when the stock was worth around $11 and it raised as high as $13+ The stock price had dropped as low as $7.15 and is currently ...
2
votes
1answer
1k views

Risk of selling stock cash secured puts and covered calls

I'm trying to determine what the potential downside is for selling call and put options, aside from the obvious loss of money if the stock moves past the strike price of the call or put sold. Right ...
2
votes
3answers
394 views

Options “Collar” strategy vs regular Profit/Loss stops

I just found out about the option "collar" strategy which is implemented with a long put and a short call. My understanding is that a collar limits the profit as well as the loss on the underlying ...
2
votes
3answers
451 views

Why does a long/purchased call option have a long position in the option itself?

I am teaching myself some finance through a book. And I get confused by call/put options having short/long position in the options themselves or the underlying assets. For example, I understand the ...