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Put
Options
A put option
gives the owner the right, but not the obligation, to sell 100
shares of a company's stock at a certain price (called the strike
price) from the date of purchase until the third Friday of a
specific month (called the expiration date).
People buy puts
because they expect the underlying stock will go down. If the
stock does go down they make a profit either by selling the puts at a higher price, or by
exercising their option (i.e., forcing the seller of the put to buy
the stock at the strike price at a time when the market price is
lower).
Put options are
quoted in dollar terms, but they actually cost 100 times the quoted
amount. For example, a put option quoted at $2.25 will
actually cost $225.00. The commission for buying options is
usually around $1.50 per contract.
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