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23-541: [REDACTED] Look up put in Wiktionary, the free dictionary. Put or PUT may refer to: Finance [ edit ] Put option , a financial contract between a buyer and a seller CBOE S&P 500 PutWrite Index (ticker symbol) Science and technology [ edit ] Programmable unijunction transistor Computing [ edit ] Parameterized unit testing , in computer programming Put,

46-932: A Hypertext Transfer Protocol request method Put, a File Transfer Protocol option to copy a file to a remote system; see List of FTP commands Put, an output procedure in Pascal , Turing, and other programming languages In C, simple functions, puts and puts() , that put text on the screen Education [ edit ] Petroleum University of Technology , Abadan, Ahvaz, Mahmud Abad and Tehran, Iran Poznań University of Technology , Poland (Polish name: Politechnika Poznańska ) Transportation [ edit ] Pui To stop (MTR station code), Hong Kong Putney railway station (National Rail station code), London Sri Sathya Sai Airport (IATA code), Puttaparthi, Andhra Pradesh, India Other uses [ edit ] Phut or Put, Biblical grandson of Noah Put (band) , from Rijeka, Croatia Put (card game) ,

69-540: A 16th-century card game See also [ edit ] Putt (disambiguation) Putte (disambiguation) Topics referred to by the same term [REDACTED] This disambiguation page lists articles associated with the title Put . If an internal link led you here, you may wish to change the link to point directly to the intended article. Retrieved from " https://en.wikipedia.org/w/index.php?title=Put&oldid=1094515289 " Category : Disambiguation pages Hidden categories: Short description

92-432: A position in the underlying stock, but only if the price is low enough. If the buyer fails to exercise the options, then the writer keeps the option premium. If the underlying stock's market price is below the option's strike price when expiration arrives, the option owner (buyer) can exercise the put option, forcing the writer to buy the underlying stock at the strike price. That allows the exerciser (buyer) to profit from

115-427: A positive return only if the underlying price falls below the strike when the option is exercised. A European option can only be exercised at time T rather than at any time until T , and a Bermudan option can be exercised only on specific dates listed in the terms of the contract. If the option is not exercised by maturity, it expires worthless. (The buyer will not usually exercise the option at an allowable date if

138-405: A set price . The buyer of the call option has the right, but not the obligation, to buy an agreed quantity of a particular commodity or financial instrument (the underlying ) from the seller of the option at or before a certain time (the expiration date) for a certain price (the strike price ). This effectively gives the owner a long position in the given asset. The seller (or "writer")

161-413: Is called " put-call parity ". Put options are most commonly used in the stock market to protect against a fall in the price of a stock below a specified price. If the price of the stock declines below the strike price, the holder of the put has the right, but not the obligation, to sell the asset at the strike price, while the seller of the put has the obligation to purchase the asset at the strike price if

184-416: Is different from Wikidata All article disambiguation pages All disambiguation pages Put option Puts may also be combined with other derivatives as part of more complex investment strategies, and in particular, may be useful for hedging . Holding a European put option is equivalent to holding the corresponding call option and selling an appropriate forward contract . This equivalence

207-423: Is equal to the strike price (at which he must buy the stock to cover the option) minus the premium received. The potential upside is the premium received when selling the option: if the stock price is above the strike price at expiration, the option seller keeps the premium, and the option expires worthless. During the option's lifetime, if the stock moves lower, the option's premium may increase (depending on how far

230-481: Is limited to the option's strike price less the underlying's spot price and the premium/fee paid for it. The put 'writer' believes that the underlying security's price will rise, not fall. The writer sells the put to collect the premium. The put writer's total potential loss is limited to the put's strike price less the spot and premium already received. Puts can be used also to limit the writer's portfolio risk and may be part of an options spread . The put buyer/owner

253-423: Is obliged to sell the commodity or financial instrument to the buyer if the buyer so decides. This effectively gives the seller a short position in the given asset. The buyer pays a fee (called a premium ) for this right. The term "call" comes from the fact that the owner has the right to "call the stock away" from the seller. Option values vary with the value of the underlying instrument over time. The price of

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276-403: Is short on the underlying asset of the put, but long on the put option itself. That is, the buyer wants the value of the put option to increase by a decline in the price of the underlying asset below the strike price. The writer (seller) of a put is long on the underlying asset and short on the put option itself. That is, the seller wants the option to become worthless by an increase in the price of

299-429: The buyer does not exercise their option, the writer's profit is the premium. A put option is said to have intrinsic value when the underlying instrument has a spot price ( S ) below the option's strike price ( K ). Upon exercise, a put option is valued at K-S if it is " in-the-money ", otherwise its value is zero. Prior to exercise, an option has time value apart from its intrinsic value. The following factors reduce

322-410: The buyer would not exercise the option if it had a negative payoff. A buyer thinks the price of a stock will decrease. They pay a premium that they will never get back, unless it is sold before it expires. The buyer has the right to sell the stock at the strike price. The writer receives a premium from the buyer. If the buyer exercises their option, the writer will buy the stock at the strike price. If

345-427: The call contract must act as a proxy response for the valuation of: The call contract price generally will be higher when the contract has more time to expire (except in cases when a significant dividend is present) and when the underlying financial instrument shows more volatility or other unpredictability. Determining this value is one of the central functions of financial mathematics . The most common method used

368-421: The difference between the stock's market price and the option's strike price. But if the stock's market price is above the option's strike price at the end of expiration day, the option expires worthless, and the owner's loss is limited to the premium (fee) paid for it (the writer's profit). The seller's potential loss on a naked put can be substantial. If the stock falls all the way to zero (bankruptcy), his loss

391-467: The option's right to sell it differ depending on option style. A European put option allows the holder to exercise the put option for a short period of time right before expiration, while an American put option allows exercise at any time before expiration. The most widely traded put options are on stocks/equities, but they are traded on many other instruments such as interest rates (see interest rate floor) or commodities. The put buyer either believes that

414-433: The owner uses the right to do so (the holder is said to exercise the option). In this way the buyer of the put will receive at least the strike price specified, even if the asset is currently worthless. If the strike is K , and at time t the value of the underlying is S(t) , then in an American option the buyer can exercise the put for a payout of K −S(t) any time until the option's maturity date T . The put yields

437-474: The price of the underlying is greater than K .) The most obvious use of a put option is as a type of insurance . In the protective put strategy, the investor buys enough puts to cover their holdings of the underlying so that if the price of the underlying falls sharply, they can still sell it at the strike price. Another use is for speculation : an investor can take a short position in the underlying stock without trading in it directly. The terms for exercising

460-431: The stock falls and how much time passes). If it does, it becomes more costly to close the position (repurchase the put, sold earlier), resulting in a loss. If the stock price completely collapses before the put position is closed, the put writer potentially can face catastrophic loss. In order to protect the put buyer from default, the put writer is required to post margin . The put buyer does not need to post margin because

483-401: The time value of a put option: shortening of the time to expire, decrease in the volatility of the underlying, and increase of interest rates. Option pricing is a central problem of financial mathematics . Call option In finance , a call option , often simply labeled a " call ", is a contract between the buyer and the seller of the call option to exchange a security at

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506-407: The underlying asset above the strike price. Generally, a put option that is purchased is referred to as a long put and a put option that is sold is referred to as a short put . A naked put , also called an uncovered put , is a put option whose writer (the seller) does not have a position in the underlying stock or other instrument. This strategy is best used by investors who want to accumulate

529-456: The underlying asset's price will fall by the exercise date or hopes to protect a long position in it. The advantage of buying a put over short selling the asset is that the option owner's risk of loss is limited to the premium paid for it, whereas the asset short seller's risk of loss is unlimited (its price can rise greatly, in fact, in theory it can rise infinitely, and such a rise is the short seller's loss). The put buyer's prospect (risk) of gain

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