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Questions tagged [put-options]

A put option is a contract giving the owner the right, but not the obligation, to sell–or sell short–a specified amount of an underlying security at a pre-determined price within a specified time frame. Related tags are [call-options, options, options-assignment, option-exercise and should be used when appropriate.

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What happens if you sell a put and the company splits or spins off a business?

I'm considering selling FB Jan 2022 puts at the $145 strike and I'd like to know what would happen in the following scenarios. Scenario #1 Facebook spins off or sells Instagram and/or WhatsApp prior ...
Mr. B's user avatar
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Put Option Settlement for All-Cash Acquisition with a CVR?

How are in-the-money put options settled when an acquisition price includes a contingent value right (CVR) that causes the stock to trade above the acquisition price? Example: Alder Bio acquired for ...
Rod Schrock's user avatar
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2 answers
150 views

Exercising Options question. Please check my math

I'm spending some time learning options and I have a scenario question. I'm attempting to have this make sense in my head but this just doesn't seem right or maybe I'm missing something. I see this ...
webnetweaver's user avatar
1 vote
2 answers
302 views

What is the effect of a short stock position on the value of an option?

I'm reading the book "Option Volatility and Pricing" by Natenberg and there is a paragraph I'm having trouble understanding. Chapter 7 (Risk Measurement 1), Page 98, Paragraph 2: The value of a ...
Shreyans's user avatar
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Put Option Value when a company liquidates

If you buy PUT options and then the company liquidates itself (please note I am not asking about bankruptcy)? What are your prospects? Do you get your value for your in-the-money puts, and if so, how?...
Kimland's user avatar
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1 answer
440 views

Are funds securing short puts in a cash account considered settled for free-riding?

For cash-secured put writing, I have enough cash in my account to cover the put if it is exercised. Is there a special category that this cash falls into with respect to free-riding? Say I wrote a $...
Anger Density's user avatar
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2 answers
2k views

Selling options below bid on Robinhood

If you sell an option for cheaper than what is someone willing to pay, does Robinhood sell it for the best price or for the price you chose to sell it? I'm trying to figure out if I can do stop loss ...
dwkd's user avatar
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3 votes
4 answers
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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 $...
john 's user avatar
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2 votes
2 answers
133 views

Currency option case

I am a bit lost with understanding the naming used for holding positions in the currency options and their payoffs. If I want to buy the European option with an amount of x USD (EUR put/ USD call), ...
Dozens's user avatar
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Why is the Strike Price so low on some Puts

I am using Robinhood and looking at buying a put for BYND. The current stock price is around $93.00, but most of the puts I find have a strike price in the $40's. I can't find anything with a ...
TheGoose's user avatar
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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 ...
Nick aa's user avatar
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payoff at expiration of a protective put

Hello the question I was asked was What is the payoff at expiration of a protective put (a portfolio consisting of one share of stock and one put option on that stock with strike price K) if the ...
Johnny Drut's user avatar
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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 ( ...
Ayush Agarwal's user avatar
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1 answer
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What Happens to OTM Puts Following a Cash Aquisition?

Say I purchase OTM puts with a $5 strike and the underlying company is acquired through a tender offer that pays $19.00 cash per share. My contracts are accelerated and adjusted to reflect the new ...
reauxtrader's user avatar
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3 answers
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Crash O Phobia and the reason for higher pricing of out of the money puts

In my stochastic finance course we are currently talking about Implied Volatility and Crash O'Phobia. According to Rubinsteins Crash O'Phobia, put-sellers attach a higher probability to the left tail ...
MikeHeimlich's user avatar
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3 answers
533 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 ...
john 's user avatar
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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 ...
Birtan's user avatar
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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 ...
4thSpace's user avatar
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Arbitrage strategy for a given put option price

Binomial Option pricing model question In the following question, S0 = stock price at time t = 0, u = up factor, d = down factor. r = risk free interest rate. Stock price at time t = 1 is either S0*...
Het Thakkar's user avatar
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1 answer
286 views

What happens to long otm oex puts if you exercise them?

Since OEX index options are cash settled and are American style, what would happen if you decided to exercise an out of the money put? Would you end up paying the difference between the strike and ...
John's user avatar
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What kind of stock option (European, American, exotic) is more popular? [closed]

I would like to know whether investors tend to prefer European, American, or exotic (aggregation of several options) stock options, either put or call. I also would like to get an idea of the relative ...
epsilone's user avatar
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Getting puts though calls

From put-call parity we know how to get put options if they are not traded, i.e. value of put = value of call + PV of exercise price - share price According to that formula our actions would be: ...
cellka's user avatar
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Present value of exercise price & call-put parity

Call-put parity looks as follows: [value of call] + [PV of exercise price] = [value of put] + [share price] *from Brealey, Myers, Allen "Principles of corporate finance" Take an example: share ...
cellka's user avatar
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Are there any mutual funds tracking equity index put option writing?

Put option writing on equity indices (like the S&P 500) can be a strategy to pick up some small premiums in a rising market while buying some slightly discounted positions in the index during ...
jaypops96's user avatar
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How does share consolidation impact options?

Kinder Morgan Canada did a share consolidation that took effect today. I see there are still options out there that reflect the unconsolidated price. Would someone buying the put option after the ...
Myles's user avatar
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Time value on puts close to expiration

Let's say it is Tuesday and a 75 strike, monthly put expires Friday. Its bid/ask are .30 x .50. The current stock price is 79.86. Implied volatility is 61%. Delta is -0.15. Why is the put so elevated ...
4thSpace's user avatar
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0 votes
1 answer
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Is legging into bull credit spread a good strategy?

Let's say I've written at put at 50 (naked put). The stock price has come down from 57 to 52. I want to reduce my exposure. Is buying a put and creating a credit spread a good strategy for this ...
4thSpace's user avatar
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1 vote
1 answer
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Is all of put option time value when OTM?

If I sell a Dec 65 strike put on 12/3 and on 12/7 the stock price is at $74 and the put bid/ask are .35 x .37, how much of that is time value?
4thSpace's user avatar
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1 vote
2 answers
185 views

Understanding the technicalities in options (put example)

My goal is to use options on a speculations level. I'm a bit perplexed with what I see on the broker account and thought this will be a good place to post my questions. So, here a fake-scenario (...
ProcolHarum's user avatar
6 votes
1 answer
27k 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 ...
iwan2know's user avatar
1 vote
1 answer
240 views

Why are my funds locked up in my trading account while using bear put strategy?

Today I used a bear put strategy and I was surprised to see that some funds in my trading account were locked up as margin used. It is well known that the potential loss in bear put strategy is ...
Rohit Bhardwaj's user avatar
2 votes
1 answer
2k 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 ...
schizoid04's user avatar
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1 vote
3 answers
246 views

If an in-the-money put option is not exercised by 4 p.m. ET on the expiration date, does it become worthless?

If an in-the-money put option is not exercised by 4 p.m. ET on the expiration date, can the shares be assigned to the seller of the put option, or does it expire worthless?
Chung Toy Yee's user avatar
1 vote
2 answers
1k views

Does option delta predict expiration probability?

I've read that delta is a probability of option assignment. For example, if you have a put with a delta of -.70, there is a 70% chance the option will be assigned. If the delta is -.04, there is only ...
4thSpace's user avatar
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0 votes
2 answers
762 views

Why doesn't cumulative call open interest and cumulative put open interest inform future stock directionality?

For example, how come the ratio of total puts and calls doesn't accurately inform of the stock's future movement?
JDM's user avatar
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2 answers
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What happens to a PUT contract for a company that is sold above the strike price and before expiration?

I'm thinking of selling long dated put contracts for a company that I believe may be acquired before the expiration date. I'll use SNAP for my example. What would happen to in the following situation? ...
Mr. B's user avatar
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0 votes
1 answer
81 views

Insuring against a drop in ETF using Put option

I am new to finance, markets and various financial securities. I just started with some Khan Academy Videos and Udemy courses. Our professor introduced the concept of using a Put Option to establish a ...
Shantanu Chopra's user avatar
0 votes
2 answers
108 views

Profit from a decline in a sector

I know that put options are "safest" bet when anticipating a stock to decline. But what of a sector, say energy, to decline over a long period of time (> 1 year). Are there additional options ...
paulj's user avatar
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0 votes
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350 views

Trading a Bull Put Spread when broker does not offer multi-leg orders possible?

Lets assume I would like to trade a Bull Put Spread on a stock from which I think it will go up moderately. I therefor buy 1 OTM put & sell 1 ITM put option, both having the same expiration time....
Matthias Güntert's user avatar
0 votes
2 answers
5k views

Delta hedge a put option without a long position on the underlying stock

I'm fairly new in this field so if I make a mistake please correct me. I have a beginners question about hedging. The delta of a put option is always negative so to delta hedge a put option I would ...
Robbe Motmans's user avatar
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1 answer
50 views

Understanding Put Warrants on SET (Thai) exchange

I have having trouble understanding exactly how these derivative products work. For example this one. I understand that the European exercise style means that they can only be exercised on the ...
Spehro Pefhany's user avatar
1 vote
1 answer
1k views

No margin account and put expires ITM

This question is a followup to a recent and similar question on buying a put: When a long PUT expires in-the-money, whose shares are being sold?. Suppose I don't have a margin account, and I buy a ...
ToniAz's user avatar
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1 vote
2 answers
468 views

When a long PUT expires in-the-money, whose shares are being sold?

If I buy a PUT without owning any shares in the underlying stock, what happens if it expires in-the-money? The seller will be required to buy the shares, but whose shares?
alekop's user avatar
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15 votes
3 answers
5k 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 ...
Terry Lennox's user avatar
2 votes
1 answer
145 views

Portfolio insurance

I am thinking about betting the house, rather than the car, and will essentially pour all my entire net worth into the market. I am trying to find a way to protect myself against a major crash. I am ...
Source's user avatar
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12 votes
1 answer
3k 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 ...
Allure's user avatar
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1 vote
1 answer
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Explicit margin requirement for RPUT ETF?

I read RPUT ETF prospectus and there is this paragraph: The number of RUT Puts sold by the Fund varies month to month but is limited by the amount held by the Fund in Treasury bills, the value of ...
user4910112's user avatar
1 vote
1 answer
154 views

Hedging a portfolio using Bull Call Spreads

I'm having some difficulty understanding how one would hedge a portfolio using bull call spreads as outlined in the following paragraph ( Today is also a good day to revisit my suggestion for a long-...
trance.guru's user avatar
1 vote
3 answers
2k views

Options: Trying to close a naked call position after the underlying drops in value

I'm having some difficulty understanding how this sort of a trade example would play out. Some input would be very much appreciated! Let's say $FB is trading at $184 today. I write OTM naked ...
trance.guru's user avatar
1 vote
2 answers
2k views

LEAPs are still long-term gains?

Do I have the following correct about LEAPs and long-term gains? If I write a put option that expires in 18 months, it is a LEAP. I get the premium once the position is opened. I close out the ...
4thSpace's user avatar
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