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  2. How put options work

    • When you buy a put option, you're placing a bet that the value of the underlying stock will decrease in value over the course of the contract.
    • When you sell a put option, you're placing a bet that the value of the underlying stock will increase or stay the same value over the course of the contract.
    www.nerdwallet.com/article/investing/put-options
    www.nerdwallet.com/article/investing/put-options
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  3. People also ask
    What is a put option?A put option (or “put”) is a contract giving the option buyer the right, but not the obligation, to sell—or sell short—a specified amount of an underlying security at a predetermined price within a specified time frame. This predetermined price at which the buyer of the put option can sell the underlying security is called the strike price.
    Should you buy a put option?Buying a put option is a bearish trade. In other words, you’re betting the price of the underlying security will go down. Investors typically buy put options when they believe in the company’s long-term prospects but want to protect themselves from any short-term paper losses.
    What is the difference between a put option and a sell option?A put option gives the buyer the right, but no obligation, to sell an underlying asset at a specific strike price on or before a specific expiration date. Conversely, selling a put option obligates the seller to take shares of stock if the option is exercised and assigned. (Remember, each option contract represents 100 shares of stock).
    What happens if you sell a put option?Selling a put means that you will receive the premium as income. Risks of selling put options include being forced to buy the shares of the underlying stock if the price falls below the strike price. Put sellers typically expect the option's underlying stock to increase in value or stay the same.
     
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