Practical Application of Put Options
Put options explained and a practical way you might put them to use
An option is a contract which gives the buyer the right but not the obligation to buy (in the case of a call option) or sell (in the case of a put option) shares of the underlying security at a specified price (the strike price) on or before a given date (expiration day)
If you feel a stock or the NASDAQ, NYSE, AMEX, et al is going to drop then you would buy put options. When and if the stock or market drops the value of the put options increase. Often the percentage the stock drops is only a fraction compared to the percentage increase in value of the option. 10% drop in market could be a 120% increase in put option contract.
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